Following is a transcripted excerpt from Fox News Sunday, June 9, 2002.

SNOW: President Bush proposes to reinvent homeland defense.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We have concluded that our government must be reorganized to deal more effectively with the new threats of the 21st century.

(END VIDEO CLIP)

SNOW: But will a new department with 170,000 employees streamline anything? Will it make us safer? We'll get the bottom line from White House chief of staff Andrew Card and Senator Joseph Lieberman.

Does Egypt have the right plan for Middle East peace? We'll find out in an exclusive interview with Egyptian President Hosni Mubarak.

Plus, our power panel: Brit Hume, Mara Liasson, Paul Gigot and Juan Williams. This is the June 9 edition of Fox News Sunday.

Good morning.

Here's the latest from Fox News. Palestinian Authority President Yasser Arafat, in a broadcast speech today, threatened a disastrous explosion that will shake the world if Israel does not retreat from Palestinian-ruled areas. Arafat did not elaborate on his comments.

This follows President Bush's assertion Saturday in a press conference with Egyptian President Hosni Mubarak that he's not ready to set a specific deadline for Palestinian statehood. The president meets in Washington tomorrow with Israeli Prime Minister Ariel Sharon.

Philippine government authorities confirmed today the kidnapped American missionary Martin Burnham was killed in a crossfire by Philippine troops, the soldiers who were trying to rescue Burnham, his wife and a nurse from Abu Sayyaf terrorist kidnappers.

U.S. military forces have discovered traces of nerve agents and mustard gas at a U.S.-run base in Uzbekistan. So far, no Americans have reported any symptoms of exposure. It's believed the chemicals came from weapons stored by base's original occupant, the Soviet Union.

And a sports note: Lennox Lewis had no trouble last night with Mike Tyson, knocking out the former champ in the eighth round of their heavyweight championship fight in Memphis.

And getting back to the news now, President Bush has wrapped up another busy week. His schedule included a national address about homeland security and a series of meetings with foreign leaders.

Here to bring us up to date on the president's thinking about the war on terror is the chief architect of Mr. Bush's homeland security proposal, White House chief of staff Andrew Card.

There's a lot of discussion this week about the homeland security department. Let's go through a couple of key aspects.

CARD: Sure.

SNOW: First, the politics. You expect it to be passed more or less in this form by the end of the year?

CARD: Well, we hope it will be. It's clearly imperative that, for the safety of the American people, we get this department up and running as quickly as possible. We've given the Congress the right solution. It took a lot of work to get there. This was done with an objective view of improving homeland security.

Congress has to overcome some of the bureaucracies that they have and address the challenge the president gave them. We hope they can do it quickly. We gave them the bill in time for them to address it this year, and we hope they will get it done this year.

SNOW: Now, you mentioned bureaucracy. One of the reasons you conducted your meetings in secret -- and it was a surprise to everybody, including people who run Cabinet agencies and departments -- you did that because you didn't want to get it killed bureaucratically.

Are you now concerned that the various operations that are going to be moved into this new department are still going to react as bureaucracies do and resist change?

CARD: We expect some of that will happen. We know that there are 88 committees and subcommittees on Capitol Hill that have jurisdiction over homeland security. Congress has to get itself to work together to improve the way America responds to terrorist attacks and securing the borders.

So, yes, we had to overcome a lot of bureaucratic inertia to get the plan done. And it was done responsibly, objectively, with the American people in mind, rather than bureaucracies. And Congress has to get its work done. Let's get it done quickly. The result is what's important. This is not about turf battles. It's about doing what's right for the American people.

SNOW: Now, there's an interesting part of the proposal that was handed out the other day. I'm going to read part of it. It said that the president will request for the department significant flexibility in hiring processes, compensation systems and practices, and performance management to recruit, retain and develop a motivated, high-performance and accountable work force.

It also sounds like he'll be able to hire and fire, more or less, at his pleasure. Is that what you had in mind?

CARD: One of the constraints that we found on bureaucracies in Washington, D.C., is that the managers don't have the freedom to manage. We see this entity as a 21st-century response from the government. It should not carry the burdens of the 20th century. So we need the flexibility to manage. That's why the most effective way to secure the homeland should come through management as well.

And we've pulled together a lot of agencies. The budgets that are included make up the homeland security department, so it's not new money. It's other money that we think can be spent more wisely.

SNOW: So you're talking about the ability to hire but also to fire people who aren't doing the job?

CARD: The important thing is the job. We want the job to get done. And yes, the management of this agency should have the flexibility to make the changes necessary to secure the homeland.

SNOW: So the civil service protections that are accorded most federal employees would not apply?

CARD: Well, I think it's too early to say that. What we're asking for Congress to do is to consider the management flexibilities that will allow freedom to manage, as we build this department to address the real challenge, which is securing the homeland.

SNOW: A lot of Americans are asking the question, if you want this kind of flexibility, why hasn't anybody been fired for what seems to have been incompetence on the job or looking the other way? At any level, we haven't seen anybody get cashiered...

CARD: That's not true.

(CROSSTALK)

SNOW: ... look the other way.

CARD: There are -- people have been moved out during this administration because they haven't done the job as the president saw that they should do it. But again, this is not about people or bureaucracies, it's about doing what is right for the country.

SNOW: Is Tom Ridge going to be the secretary of homeland security?

CARD: Well, we don't know what Congress will decide to create the homeland department to look like. If it's a department that isn't worthy of the kind of leadership that Tom Ridge can provide, I doubt that he would want to do it.

CARD: It's premature. Let's see how Congress responds to what the president does before we find out who should run the department.

SNOW: Why was he described as an adviser rather than the director of homeland security?

CARD: He's not the director of homeland security. He's the homeland security adviser to the president of the United States, and that's his title. He's assistant to the president and homeland security adviser. And that's the right title, and that's his job. And he will counsel the president. He will continue to counsel the president.

The president has also directed that he go to Capitol Hill to talk to Congress about the need for this new department and why that need has to be addressed.

SNOW: Let's ask a very important hypothetical. If this agency had been in place on September 11th, would people have connected the dots?

CARD: I think that there would have been a better chance that they might have been connected, because it would have been a different set of eyes looking at the dots. The CIA collects dots and looks at dots to see how they might be connected. The FBI collects dots and will now start to look more comprehensively at the dots as they potentially are connected.

It would be good to have in the department of homeland security another place where people can look at the dots to see how they might be connected. The result will be other intelligence that they would have the benefit of -- Coast Guard information, INS information, Border Patrol information, DEA information. That's important.

Also, at the homeland security department, that agency will have the ability to assess the vulnerabilities of the country. And we have dynamic vulnerabilities: conventions and Republican Party meetings, Democratic Party meetings, meetings of Jewish leaders, meetings of Arab leaders, the Super Bowl, football games. Those are all dynamic vulnerabilities in this country.

We also have static vulnerabilities: the White House, refineries...

SNOW: Bridges, roads and so on.

CARD: ... bridges. And this department will be able to analyze the vulnerabilities as well as the threats.

SNOW: Did the president give his address this week to deflect attention from hearings on Capital Hill?

CARD: That is really an absurd suggestion. This was done deliberately over a long period of time to develop what was right for the country, and when it was ready, it was produced. We did not want this to be sitting around where it could be leaked, if, for example, bureaucracies could tear it apart or try to, or that committee chairmen on the Hill would start talking about the value of their turf as compared to doing what's right for the country.

So we said when it's ready, it will be announced. And as soon as it was ready, it was announced. We also wanted to give Congress enough time to act on it this year. And there aren't that many days left on the congressional calendar, so we wanted to get the bill up there as quickly as possible.

SNOW: Yasser Arafat has predicted an explosion that will impact the stability of the world if Israel doesn't get out of the West Bank. This comes a day after the president heard Hosni Mubarak, the Egyptian president, say "We need to give Arafat a chance."

CARD: I haven't seen the quote. You mentioned it to me this morning just before we came on air, so I don't think I can comment about it.

I hope that that would not be a comment coming from Arafat...

SNOW: If that quote is accurate...

CARD: I guess I would view it as something that could not possibly be a reality. And hopefully it was just hyperbole that has no merit.

SNOW: Ariel Sharon coming to town to meet with the president. He has said that the key element of the Saudi peace proposal, the retreating to 1967 borders, simply is not going to happen, it's a non-starter.

CARD: Well, actually, the thing that we should all be worried about is bringing more stability to that region.

The Palestinian people are being very poorly treated by their leadership. They've had no hope, no opportunity. And security for the Isreali citizens is not what it should be.

And that's what the primary objective should be, to make sure there is security for the Israeli people and hope for the Palestinian people, and we've got to work toward that.

SNOW: Do you think the Palestinian public is ready for a leader other than Yasser Arafat?

CARD: The Palestinian people must be frustrated because they have not seen economic opportunity or the freedoms. They can't even really participate in their own government. So we've got to see reforms in the Palestinian community, and hopefully they will come sooner rather than later.

SNOW: I also mentioned to you right before we came on the air a piece that's in U.S. News today. It talks about the Secret Service. There are a number of allegations about irregularities, one of which is that, in the room in which they try to do the counterterrorism work, you got officers right now looking at porno flicks.

SNOW: If that's true, are they out of there?

CARD: I have no idea if that's true. It's the first I've heard of it. It doesn't sound credible to me.

SNOW: Do you know -- you know George W. Bush.

CARD: I sure do.

SNOW: What would he do about that?

CARD: I can't imagine he'd be pleased. But again, let's let us take a look at it. I did not know this was going to be in a story or if it's factual or whatever. And I don't believe everything that's in print.

SNOW: Speaking of which, Esquire magazine had a large piece on Karen Hughes, who, as we all know, is going to be leaving. You're quoted in it, and I want to read a quote and find out if you actually said this.

"The whole balance of the place, the balance of what has worked up until now for George Bush is gone, simply gone. My biggest concern? That the president will lose confidence in the White House staff because, without her, we'll no longer be able to provide the president with what he needs, what he demands."

Did you say that?

CARD: There are a lot of things in that story that...

SNOW: Did you say it though?

CARD: You know, if you start playing that game, Tony, you know, is the sky up or down or around or through -- no, my job is to make sure the White House works well for the president. I have one customer, the president of the United States. And I want to make sure the White House works in such a way that he is able to do the job for the American people.

We've got a great team, a spectacular team, and...

SNOW: So...

CARD: ... it's a team that can work well together.

Karen leaving does create a void. But there's not a doubt in my mind that we can't serve the president well.

SNOW: So, it's not going to be destabilized, as that quote would imply. That's your job to keep it stable, isn't it?

CARD: I think it's a very good White House, thanks to the president's leadership. And I'm so proud to work for him, and I know everybody there is proud to work for him as well.

SNOW: Finally, global warming. Is it the president's position that the planet's warming up but we don't know why?

CARD: It's the president's position that the response that came out of Japan, the so-called Kyoto treaty, would not do anything to mitigate the problems of global climate change, if there are problems. And I happen to think that there are probably some problems, but I'm not sure that that's the right way to mitigate them.

And he has said there's...

(CROSSTALK)

SNOW: ... problems, you mean?

CARD: There are better ways to go. And the president has talked about the better ways to go.

First of all, markets should play a role. You know, the marketplace, the economy. You cannot cram demand into a system. You have to invite consumers to respond to demand. So the president has a much better response to the global climate debate than the Kyoto treaty -- or the Kyoto protocol does.

And if the United States were to adopt the Kyoto protocol and take all of its mandate through our economy, we would put a lot people out of work. We would not have the growing economy that the rest of the world demands. So it's a horrible response to what may not be a real big problem.

SNOW: OK, I want to go back to one small technical issue. Tom Ridge, his official title is director of homeland security. He's sworn in as that. That's the title on the White House press release.

CARD: Well, that doesn't make it right.

(LAUGHTER)

You have to look at the executive order that created the department. He's assistant to the president and homeland security adviser. And he runs the Homeland Security Council. And he oversees the White House Office of Homeland Security. So that's his job, and he does it very well.

He's an adviser to the president. You worked in the White House, and your advice to the president was not subject to oversight from Congress.

We suggest that Tom Ridge has been charged to go to Congress by the president to talk about the creation of the Homeland Security Department, and that's an appropriate response for the president to make. And Tom Ridge will do a great job of articulating why it is so important that Congress act quickly to create this department and help to provide greater security to the American people.

SNOW: Andy Card, thank you.

CARD: Thank you, Tony.

SNOW: We're going to take a break. Coming up, creating the Department of Homeland Security. Are we about to see the mother of all turf battles on Capitol Hill?

(BEGIN VIDEO CLIPS)

U.S. SENATOR JOSEPH LIEBERMAN (D-CT): Change is never easy.

LIEBERMAN: It's no time for business as usual.

LIEBERMAN: The status quo has simply not worked.

(END VIDEO CLIPS)

(COMMERCIAL BREAK)

SNOW: Now with more on homeland security and Capitol Hill politics, Democratic Senator Joseph Lieberman. Also here, our panel: Brit Hume, Washington managing editor of Fox News and Fox News contributors, Mara Liasson, national political correspondent for National Public Radio, and Juan Williams, national correspondent for NPR.

Senator Lieberman, some of your colleagues in the Democratic Party have been a little frosty in their response to the president's proposal to create a new department of homeland security.

Ted Kennedy had referred to it as rearranging the deck chairs on the Titanic. And John Conyers of Michigan had the following quote which we are going to show our viewers: "I am concerned that this is a damage-control document that was more designed to divert the nation's focus from the problems at the CIA and the FBI than intelligently reorganize our security bureaus."

Your reaction?

LIEBERMAN: I respectfully disagree. Maybe that's not surprising since the president's proposal embraces just about all of the bill that Arlen Specter and I put in and it was reported out of my committee a couple of weeks ago.

The fact is, the catastrophic events of September 11th are evidence that the status quo, in terms of homeland security, is not working, was not working.

We've had enough evidence in the last several months with Governor Ridge as the director of homeland security, the advisor to the president, whatever he is, that he needs more authority. The president gave Tom Ridge the biggest, most difficult job in the federal government today; didn't give him the power to get it done.

And so I welcome the president's proposal, and I look forward to working with him and others to get it passed into law quickly.

SNOW: Do you expect Governor Ridge to be the director of that department, to be the secretary of homeland security?

LIEBERMAN: Tony, of course, that's the president's decision. But it's no question that the presumption on Capitol Hill, I think, in both parties, is that Governor Ridge will become the first secretary of homeland security. It would be a surprise if that does not happen.

SNOW: And there's a lot of talk that this can have a lot of trouble on Capitol Hill. Yet you have Richard Gephardt saying, "I'm all for the bill;" you're for it. Is that kind of a red herring? Is this bill actually going to have smoother sailing than a lot of people suspect because it is so politically popular?

LIEBERMAN: Well, I hope so, but I think it's wise to get organized for internal battle here, both with the bureaucracy, the constituencies that parts of the bureaucracy has, and even members of Congress.

But we've got the president, we've got a strong, bipartisan group of members of both Houses that have already been for this idea. We ought to be able to get it done.

HUME: You spoke the other day about this, when the bill was first -- or the idea was first put out. You've had a few days to look it over now. Where do you expect that the most resistance -- or where do you expect likely resistance to this idea to come from, specifically?

LIEBERMAN: Oh, look, there will be those who say that the Coast Guard, for instance, a border control agency, ought to be independent. I don't think so.

HUME: Well, it's not independent now, is it? It's part of the DOT.

LIEBERMAN: It's not independent now, and it's in Transportation now. It makes, actually, more sense for it to be in Homeland Security than in Transportation.

There will be a debate about Immigration and Naturalization Service and whether both sections of that, law enforcement and service, so to speak, naturalization, ought to be in a homeland security department. Senator Kennedy, for instance, has already said, I believe, that he doesn't think that the function of immigration ought to be dominated by a security agency.

Our bill made a different decision on this. We left the service parts of the immigration and naturalization department in the Justice Department and took the law enforcement and put it in Homeland Security.

But the president's proposal is a reasonable one, and I think that will be part of the debate. But that's not the kind of debate that ought to or do I think will stop this from being adopted.

LIASSON: Senator Lieberman, one of the criticisms of the president's proposal is that it doesn't address one of the biggest weaknesses that we learned about, which is the lack of sharing of information between the FBI and the CIA. Do you agree with that? And what can Congress do to correct that?

LIEBERMAN: I do agree with that. We spoke about this a little bit at our meeting with the president on Friday morning at the White House.

But in the bill that my committee reported out, we not only created a department of homeland security, we created a statutory office of counterterrorism coordinator in the White House, an adviser to the president. And that's because homeland security is just one part of a counterterrorism effort. We also have, obviously, the State Department, the Defense Department.

The Pentagon's about to create a command, the Northern Command operating out of Colorado Springs, which will not only have not only its traditional responsibility for the safety of the U.S. from the skies from enemy attack, but here at home.

LIEBERMAN: And we've also got intelligence agencies and law enforcement, FBI.

And I think we still need an office within the White House with the statutory and some budgetary authority to coordinate these operations. Because, look, what most infuriates and aggravates us and breaks our hearts now about what we learned about what happened before September 11th is the absolute failure of the intelligence community to share information with the law enforcement community and vice versa. If that had happened, I still think we had a chance to prevent September 11th.

WILLIAMS: Well, Senator, let me follow up on Mara's question then.

LIEBERMAN: Yes.

WILLIAMS: So why is it that the president has not gone about making sure that the FBI and CIA are more likely to share information, as he proposes this new department of homeland security?

LIEBERMAN: Well, the answer we got, Juan, on Friday morning at the White House was that the administration and the homeland security department has created a kind of clearing house, where intelligence and FBI and other law enforcement will feed information in, so you won't have these gaps.

That's a good step, but I think that we need something stronger. And again, if one thing cries out from the investigations going on now about what events led to September 11th, it is this lack of coordination.

The president very strongly wants to maintain a direct contact with the CIA, for instance. The way to do that is with this kind of strong statutory counterterrorism adviser to the president in the White House who brings it all together.

WILLIAMS: Now, this week...

LIEBERMAN: So far, in the president's proposal, he's taken the Ridge office and made it much weaker and not given it statutory strength. And I think that's something we in Congress are going to want to look at and work with the president on.

WILLIAMS: This week you had Coleen Rowley, the Minneapolis FBI agent, testifying up on the Hill, and of course that led to lots of concern about FBI reforms, as proposed by Attorney General Ashcroft.

Do you think that the attorney general and the FBI Director Mueller have gone far enough in terms of those reforms, or are they simply window dressing?

LIEBERMAN: Well, I think they've turned the FBI around in the right direction. The question is whether they've done enough internally to change the culture -- and only time will tell us that -- to encourage independence, innovation and, frankly, some sort of street smarts, the kind of stuff we see -- forgive me -- but in the New York Police Department, the NYPD.

When I say they've turned it around, it's clear now that post- September 11th, the FBI has to become what it has been in part but we've not been willing to really let it be, which is a domestic intelligence agency. The best way to stop terrorism in an open and free society is to prevent it before it happens by knowing what the terrorists are going to do. And the only way we can do that is with a very aggressive domestic intelligence department, and that's the FBI.

HUME: You're not suggesting, Senator, that the FBI and/or the CIA or other intelligence agencies should have been folded into this new department of homeland security, are you?

LIEBERMAN: Well, I gather from some press reports that the administration actually considered that. And that's not something I would do this year, but I'd keep it in mind. I'd keep it on the table and see how things go.

For now, I think the best thing that we can do -- and again, it has to happen through the White House, this counterterrorism coordinator -- is to force the foreign intelligence agencies, including the CIA, and now the domestic intelligence agency, the FBI, and local and state police enforcers to work together through that White House office.

HUME: I'm a little puzzled by your suggestion about this White House office, because the criticism that came from Capitol Hill and, indeed, was suggested by you, as well, about the current office of homeland security was that it had no budgetary or line authority, and therefore it wasn't strong enough to get the job done. And that led you to urge the kind of department the president has now urged.

Now you seem to be turning back to the idea of having a new office within the White House. Wouldn't that suffer from the same afflictions that you say that the Ridge office suffered from?

LIEBERMAN: No. Here's what we were really concerned about. That there wasn't anybody to take the almost 100 federal agencies that have to do with protecting the American people at home and telling them, "Get together, work together, and do it now, or else I, the secretary of homeland security, are going to move your budget or get you out of what you're doing."

I think we will do that if we adopt the president's plan for a department of homeland security. But that's a separate question from an overall counterterrorism coordinator, because homeland security is only one part of the counterterrorism effort. We've got the State Department, the Defense Department, and the intelligence agencies, foreign and domestic. And I think, for now, the best way to put those together is with a strong White House coordinator right next to the president.

SNOW: Senator Joseph Lieberman, thanks for joining us today.

LIEBERMAN: Thank you, Tony. Good to be with you.

SNOW: Up next, Middle East peace prospects with Egyptian President Hosni Mubarak.

(BEGIN VIDEO CLIP)

BUSH: Chairman Arafat, as far as I'm concerned, is not the issue.

HOSNI MUBARAK, PRESIDENT OF EGYPT: If he's going to deliver, I think everybody will support him. If he's not going to deliver, his people will tell him that.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

SNOW: This weekend President Bush met with Egyptian President Hosni Mubarak to discuss the tenuous situation in the Middle East.

After his meeting with President Bush, I talked with the Egyptian president. I began to talk to him about the idea of holding an international peace conference to discuss relations between Israel and the Palestinian Authority.

(BEGIN VIDEOTAPE)

MUBARAK: If the peace conference is not well prepared and the agenda is really (ph) known and discussed with the leaders of the area, it will not lead to a good result, and the people have high expectation on that.

I think that this conference maybe held on ministerial level. And before that, I asked the secretary of state just make a tour in the country, having the items which is going to be included in this conference and discuss it with them, so as when the conference is convened, it will have good results.

But to be -- have a conference on the summit level, it's too early to do it now because it needs lots of preparation.

SNOW: Do you believe the president is ready to make his own peace proposal?

MUBARAK: I think President Bush may -- I think that he is going to deliver a speech of his ideas. And I think he gave up some of that to you when he said -- and he said it today again -- there should be two independent states living beside each other, secure in each other.

I think it is a very good proposal. If everybody thinks deeply to be the best guarantee for the Israeli people to live in this area, because having two states, better than dealing with individuals and better than dealing with an authority who has no control now on all the factions they have, but dealing with a state, a government is much more practical and much more convenient to both sides.

SNOW: Must the United States take the lead role now?

MUBARAK: The United States is the key for the peace process. Such two states, Israelis and the Palestinians, if they are left alone to solve the problem, they will reach nowhere.

Let us look -- remember what happened between IRA and the Britain. They kept fighting each other (inaudible) for quite a long time, several years, until a country with a heavyweight like the United States interfered and brought the two parties and namely (ph) imposed, after they discovered that all (ph) partners, an agreement which has been accepted by both. And that's why you never hear about them.

So I think these two parts, the Israelis and Palestinians, need a heavyweight like the United States. And we, as partners in the area, and it effects us, the situation, we are ready to help in the Arab world.

SNOW: What should the president tell Ariel Sharon this week?

MUBARAK: I think he should tell Ariel Sharon that he should work for peace. And destructions and using force and the killing and retaliation every now and then will never bring peace.

And I think that he should work on confidence-building measures to start to giving hope to the people by withdrawing from the land which they have acquired since the 28th of September, 2000.

Then they should work on improving the circumstances of the Palestinian people.

SNOW: The president has said that Ariel Sharon is a man of peace. Do you agree?

MUBARAK: I hope that Ariel Sharon could be a man of peace. I pray for that, not to continue destructions and killing and destroying houses. This will never help. Who continues doing this, that means that he is not looking forward for the future of the area, the future of the people.

SNOW: The president has also said that Yasser Arafat has let down the Palestinian people.

MUBARAK: I cannot count too much about that. But I spoke with the president about both sides. And I think he understood that Arafat, if he's going to work and he is going to make reform as he was told in his government and if he's going to deliver, I think the people accept him. If he's not going to deliver, it's the fate of the people.

SNOW: It's interesting, do you think the Palestinian people are now more willing to express their opinions about Yasser Arafat, including opposition, than they were even a year ago?

MUBARAK: Arafat now is weak, very weak. He has no police, no intelligence (ph), not tools to work with. That's why he's very weak.

MUBARAK: If you ask the people now, they say they are fed up. But if he's given the authority and given the tools, I think it would work very good. If not, the people who elected him will not accept him afterwards. We should give him a chance anyway.

SNOW: Do you think the president will give him a chance?

MUBARAK: I think that. And I think he said it today in the press conference.

SNOW: Well, he said it was an interesting idea.

MUBARAK: He said (inaudible) we'll try hard. How could we expel somebody that's been elected by democratic ways by his people?

There will be elections coming. And if the people doesn't want him, then let him go.

SNOW: The United States is waging a war on terror. You are part of that war. This week Iran agreed to increase its funding for Islamic jihad and suicide bombings by 70 percent. It's done the same with Hezbollah. Should Arab nations, together, go to Iran and say, "Stop this?"

MUBARAK: We always tell them, "Stop." We are against that completely. We usually have tough time with them on the stuff that (inaudible) people. I think now Iran is much more cautious than ever before.

SNOW: Syria, there's also concern about Syria's financing of suicide bombings.

MUBARAK: Look, to tell Syria financing -- Syria has no funds just to spend on suicide bombs and that. This may be a propaganda. Now Syria is very keen (ph) even on Hezbollah. They don't give them money. They don't give them sympathies (ph) now. Syria is very alert to that situation.

I have spoken with the Syrian president in that sense. I told him that we no more accept any kind of terrorism or (inaudible). I think they are very keen (ph) on that. They want peace. The Syrians want peace.

SNOW: There has been some speculation, and you have seen it in the press, in the American press, that Saudi Arabia has sort of snatched the spotlight from Egypt.

MUBARAK: Look, my friend, I don't care about what's written here or there. It's like something to put a problem between the two countries. Never. We are cooperating together.

When I go to them, I see special envoy from Saudi Arabia to the exchange of views. When Crown Prince Abdullah came here to the United States, we exchanged views and I sent him a special envoy too. So we have good cooperation with Saudi Arabia.

Anything to be said like this is trying to put the problem between two countries. We will never, both of us, will never accept any problem. We really have good relations, good cooperation, and we are both working in the field of peace.

SNOW: How about Usama bin Laden. There's been speculation about whether he's alive or dead. But has he twisted the message of Islam?

MUBARAK: I know nothing about Usama bin Laden now. He's disappeared. I don't know if he's killed or not. So I cannot give you any more information.

SNOW: Well, he said he is doing this on behalf of Islam.

MUBARAK: No, Islam is not bloodshed, it's not terror, it's not killing, it's not committing tough action like this. I think Islam is completely different from that. Islam like other religions. Likes love, cooperation, and these good principles in life.

SNOW: And we're talking about a peace process and proposals. Do you think it is conceivable that the United States can make a bargain, say to Israel, "If you get out of the settlements, we will try to make sure that there is no unlimited right of returns so the Palestinians do not outnumber Israelis in Israel?" Could that be a keystone to coming to an agreement?

MUBARAK: I think the United States cannot do this alone. They have to consult with the Palestinians and the Israelis, because maybe (inaudible) accept to have the refugees return back.

And at the same time there's a problem between the United States and Israel and the Arab worlds because of the settlements. The settlements is a time bomb.

SNOW: Do you think George W. Bush is capable of providing the basis for a lasting peace?

MUBARAK: I think he's capable.

SNOW: Do you think he will?

MUBARAK: He will try. I cannot tell you that he 100 percent that I'm sure that he's going to maintain (ph) this, but he's doing his best.

SNOW: Do you think he will come up with a proposal that you can support?

MUBARAK: I would support his proposal because usually before declaring any proposal, he discuss with us and with Sauds and other neighbors there to be a success.

SNOW: President Mubarak, thank you.

MUBARAK: Thank you very much.

(END VIDEOTAPE)

SNOW: And we want to give a special thanks to 89th Airlift Wing at Andrews Air Force Base for helping us put together the interview and set up the logistics.

Up next, the stories you're not going to find on any other Sunday show and our panel on the president's plan to improve homeland security.

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