This is a partial transcript from "Your World with Neil Cavuto," October 5, 2006, that was edited for clarity.

NEIL CAVUTO, HOST: Well, House Speaker Dennis Hastert also questioning if Democrats knew about Foley's misconduct with pages, and then withdrew the information for just before the election — in an interview with The Chicago Tribune, Hastert saying — and I quote — "When the base finds out who is feeding this monster, they are not going to be happy. The people who want to see this thing blow up are ABC News and a lot of Democratic operatives, people funded by George Soros."

With us now, billionaire George Soros. His new book is entitled "The Age of Fallibility: Consequences of the War on Terror."

Mr. Soros, good to have you.

GEORGE SOROS, FOUNDER AND CHAIRMAN, OPEN SOCIETY INSTITUTE: Pleasure.

CAVUTO: You timed it for this, didn't you?

(LAUGHTER)

SOROS: No, I didn't.

(LAUGHTER)

CAVUTO: All right.

What do you make of that, that he is essentially charging you and other operatives behind some of these leaks.

SOROS: Well, the implication that I had something to do with this scandal is so far off the mark, that it's really laughable. I mean, it's a feeble attempt to divert attention from him and his responsibility.

He — he has done it before...

(CROSSTALK)

CAVUTO: In 2004, right?

SOROS: To me. To me. But, this time, I don't think he can get away with it.

CAVUTO: All right.

But you're a busy man, right? You wouldn't necessarily know what some of the Democratic groups and the 527 plans you fund are up to, right?

SOROS: That's — no, I don't.

CAVUTO: OK. So, it's possible that they could be doing this sort of stuff?

SOROS: It's possible.

But I knew — I heard about it the first time when it appeared on — on television.

CAVUTO: Let me ask you about a comment you made to the Council on Foreign Relations earlier this week, I believe, Mr. Soros, where you said: "I would very much like to get disengaged from politics. I'm interested in policy, and not politics."

Does that mean you don't contribute anymore?

SOROS: No. I think it's very important, actually, to reestablish checks and balances for the Democrats to capture at least one of the houses.

But I think that we are really in very big trouble as a country. And I really need — we need to deal with the really dismal prospects that we are facing in the war on terror.

CAVUTO: All right.

I do want to focus on that war, but, if you will indulge me, sir, they're — I have gotten different reports on how much Soros Fund Management has donated this year to Democratic causes and/or campaigns. The figure is roughly $2.3 million, again, largely to 527-type groups, America Votes 2006, EMILY'S List Non Federal, New Democratic Network, Progressive Kick.

These are groups that are also working aggressively to see the House and/or Senate turn.

SOROS: Yes. It's not Soros Fund Management. It's me personally.

CAVUTO: OK.

SOROS: It's my personal money.

CAVUTO: All right. So, this is $2.3 million of your money.

SOROS: Yes.

CAVUTO: OK.

And that's an accurate figure?

SOROS: Yes. Yes. And I think it is more, actually.

CAVUTO: Oh, really? OK.

SOROS: Yes.

CAVUTO: Because it's 20 times what you gave four years ago, in the last midterm election.

SOROS: No, no. It's — last midterm, no — yes.

I really became engaged in domestic politics in 2004, because I felt that the single most important thing I could do to make the world a better place is to help get President Bush out of the White House. And, unfortunately, events since then has — have borne me out.

CAVUTO: What — why did you think that, despite all your money, whatever it was, $24 million, $25 million — and you touch on it in — in your book — the American people reelected George Bush?

SOROS: Yes.

Well, partly, I think the elections came a little too early for people to realize how bad things were in Iraq. But, also, I think there is something wrong, unfortunately, with our electorate, because we don't like to hear inconvenient truths. We want our — our leaders to tell us what we want to hear: Everything is fine. We are in charge.

And, unfortunately, we have to face reality. And...

CAVUTO: What's the reality to you? You say the war on terror is essentially a mistake.

SOROS: That is what I am saying.

The — it's — it's the natural way to respond to the terrorist attack. We were attacked. We have to hit back. We will call it a war.

But the way this phrase, this — this figure of speech was then implemented actually was counterproductive. It has made the terrorist threat much bigger. And it has really endangered our dominant position in the world.

CAVUTO: But — but you were supportive in the early days. And you spell this out in your book, that, in the early days, and going into Afghanistan, and going after the Taliban, that you were for.

SOROS: Yes. Yes.

CAVUTO: And you do have a record of being for military incursions in the past, as in Bosnia, etcetera.

SOROS: As a mater of fact, I was together with — with — with Paul Wolfowitz, lobbying the Clinton administration for taking a — a more forceful position in — in the Balkans.

CAVUTO: Yes, you were.

SOROS: Yes.

CAVUTO: But here's what — what might shock some people. And I guess this is why you — you can be a polarizing figure, Mr. Soros.

You say...

SOROS: I hope not.

(LAUGHTER)

CAVUTO: You say the War on Terror, as we have waged it since 9/11, has done more harm than good.

SOROS: Yes.

CAVUTO: That's pretty strong.

SOROS: Well, because, you see, we abhor terrorists, because they kill innocent people for political goals. Now, so, when we chase them down, we really must go out of our way not to do the same thing, because, if we torture people, humiliate people, kill people who are innocent, they look at us in the same light as we look at terrorists.

And that is, in fact, what has happened, particularly in Iraq.

CAVUTO: But here's what — what alarms some people. It alarmed me a little bit, Mr. Soros, reading your book.

SOROS: Yes. Yes, please.

CAVUTO: You said, "I feel strongly that we cannot regain our balance until we repudiate the war on terror."

What would you say to the terrorists and those who, you know, rammed planes into buildings and killed so many innocents here, when you're saying, repudiate the war on terror?

SOROS: No, because the war on terror is a — a false metaphor. It's the wrong way to — to fight terrorists.

CAVUTO: Well, how would you...

SOROS: We must...

(CROSSTALK)

CAVUTO: How would you fight it?

SOROS: We — we have to catch them. We have to track them down.

And — and, if possible, we have to infiltrate into their organizations, the way the British have done. They have really managed to prevent a terrible incident that could have been worse than 9/11. They were successful in doing that.

So, the — the — there's a lot wrong with the War on Terror that people don't — don't understand. I mean, these — creating innocent victims creates rage and resentment, which feeds into terrorism. So, as — today, now, our intelligence community has reported to the president that our actions have made the terrorist threat worse.

CAVUTO: But I would turn it around, Mr. Soros, and say, we have not been attacked on U.S. soil in more than five years.

SOROS: Yes. Wonderful. I'm delighted.

CAVUTO: Is that an accident?

SOROS: No.

Well, the — the — the threat, the terrorist threat, in the world is much greater today than it was five years ago. There are many more people motivated to fight us wherever they find us.

CAVUTO: But you're one of the greatest studiers of — of history I know.

And — and you remember the '93 attack on the World Trade Center. You remember the USS Cole. You remember Mogadishu. You remember, terrorists have hated us long before this president came into office, long before the prior president came into office. A lot of people have hated us.

(CROSSTALK)

CAVUTO: So — so, are we to say we don't want more people to hate us, so we — we — we stand back?

SOROS: No, no, no.

There was a small extremist group, relatively small, that had this really awful idea of waging war against us, or attacking us. But now there are many more people who feel that way. And, so, that is what I mean, that it's counterproductive, that we have actually fed into the rage and resentment that can be exploited by terrorists. And that's what the military — the military intelligence have been telling us now.

CAVUTO: OK.

We're going to take a quick break here — more with George Soros. The book is "The Age of Fallibility."

A lot of you have mailed in with some rather choice remarks for Mr. Soros. We are not going to repeat all of that, but we will get to the finer points about the economy, the war on terror, this president, maybe a future president. Who is he banking on right now?

George Soros, an exclusive chat on FOX — more after this.

(COMMERCIAL BREAK)

CAVUTO: He is considered one of the most controversial billionaires on the planet. And, last time I checked, there aren't a whole lot of billionaires on the planet. But, according to Forbes magazine, he is the 27th richest one.

George Soros back with us. The book is "The Age of Fallibility: Consequences of the War on Terror." And, in that book, he has nothing good to say about the president of the United States. Nothing. Zero.

You hate the guy.

SOROS: No, I certainly don't hate the guy at all. This is a misunderstanding.

CAVUTO: You didn't say one thing nice about him.

SOROS: Unfortunate. I am opposed to the policies. I think our policy...

CAVUTO: But has he done anything good?

We — we got the Dow at a record. We got the economy doing pretty well, 4.7 percent unemployment.

SOROS: I have no — I have no beef with the — with the economic policy.

I think I can say something good, actually, about him...

CAVUTO: OK.

SOROS: ... because he — he has been very broad-minded on immigration. And he really sponsored a good bill. Unfortunately, the House Republicans...

CAVUTO: Are a little tougher, right.

SOROS: ... refused. They just took the punitive part. They didn't take the constructive part.

CAVUTO: But you will acknowledge that...

SOROS: But...

CAVUTO: ... the economy is OK?

SOROS: Well...

CAVUTO: The markets are OK?

SOROS: I — look, I don't want to — markets are something else.

CAVUTO: I know. I know you're worried about a slowdown and maybe even a recession next year.

(CROSSTALK)

SOROS: Yes. But I think — I think, for instance, the Federal Reserve...

CAVUTO: Right.

SOROS: ... has — has — is handling the situation very well by not having raised interest rates more.

So, look, you know, I'm not — the fact that one side is wrong, it doesn't mean that the other side is right.

CAVUTO: But I got this feeling, Mr. Soros — and I could be interpreting too much from the book and from your prior comments — I have followed you closely for a couple of decades — that you just don't think this president is right for the job, fit for the job, that you almost think he's an idiot.

You said that, "George W. Bush is more like an unwitting tool. Cheney" — you're referring to the vice president — "is the power behind the throne."

SOROS: That's what I believe.

CAVUTO: You really believe that?

SOROS: That's exactly what I believe.

CAVUTO: So, what, Cheney goes in the office, says, this is what we're doing today?

SOROS: I think that the Cheney-Rumsfeld wing of the Bush administration is the one that is — is really fostering the — absolutely the wrong policies. My real disagreement, I think, is with them.

CAVUTO: OK.

So, it's not so much that you think battling bad guys or people who want to ram planes into buildings is bad. You're thinking our response to it is bad? You are saying that you have got to talk to the bad guys?

SOROS: No.

Look, incidentally, when you make peace, you need to make peace with your enemies, not with your friends. So, while there's no talking to Al Qaeda — it's nonsense — the — there are many other political movements that use terrorist tactics, which are really not acceptable, where I think it's very necessary to actually come to some agreement.

I mean, the — the — in Iraq, right? It's really our — the occupation and the humiliation we have inflicted on people whom we put into prison, tortured, humiliated, who then...

CAVUTO: But — but...

(CROSSTALK)

CAVUTO: ... humiliation, Mr. Soros.

I mean, here's humiliation for you: 3,000 of our people getting killed.

(CROSSTALK)

CAVUTO: And, after that, you say, "When I — when I heard President Bush say, either you are with us or you are with the terrorists, I was reminded of Nazi propaganda."

SOROS: But, look, look, look...

(CROSSTALK)

CAVUTO: That — now, you're — you're a very smart man, London School of Economics, very...

(CROSSTALK) CAVUTO: Is that a proper statement, to compare the leader of the free world to a Nazi?

SOROS: No, I did — I did not call President Bush a Nazi.

CAVUTO: You said reminded you of Nazi propaganda.

SOROS: Yes. You know, when people who criticize the administration's policies are called traitors, that is exactly what the Nazis did. And that does remind me, and I do take objection to it, because that's against the -- the principles of critical discussion, which has made this country great. And I really have to stand up for that. So — but...

(CROSSTALK)

CAVUTO: And — and the Democrats, you said, were guilty of not criticizing the administration early on.

SOROS: That is...

(CROSSTALK)

SOROS: Yes.

CAVUTO: And you held them accountable for that, because they were too acquiescent.

SOROS: Yes.

CAVUTO: So, turn it around. Now, John Kerry has said his vote for the war, in retrospect, was a mistake.

SOROS: Yes.

(CROSSTALK)

CAVUTO: Here's a guy you wanted...

SOROS: Yes.

CAVUTO: ... and pushed heavily, and expensively, to get elected.

Didn't work out. Now he says it's a mistake. What do you think of someone who says, mistake?

SOROS: Oh, you know, this is the thing that we have to learn, that we are fallible, and we make mistakes. And...

CAVUTO: He wants to get us out.

SOROS: And, if he — and if he — if we mistakes, we have to admit our mistakes. And I think what we have done, and the way we have done it, was a mistake.

And now the president is telling us that we should — that we should stay the course, but we are — he's taking us in the wrong direction. We're getting deeper and deeper into a hole now.

(CROSSTALK)

CAVUTO: I'm sorry. I want to be clear with this.

Now, John Kerry, as you know, sir, is saying, get out.

SOROS: Yes.

CAVUTO: And — and what I'm asking you...

SOROS: Yes.

CAVUTO: ... is the person you can support in 2008, if it's Hillary Clinton, who is still for the war, many criticisms, but still for the war, or John Kerry, who is against the war, get out, who would and could you support?

(CROSSTALK)

SOROS: Look, what — the message I want to deliver to the — to — to the American public, that we are woefully misled, that we must change course. We have — we have to recognize our mistakes. We actually have to get out of Iraq. But we have to get...

(CROSSTALK)

CAVUTO: Do you...

(CROSSTALK)

CAVUTO: ... a timetable?

SOROS: We have to get out with the least possible damage, because we are sitting on an incipient civil war.

CAVUTO: So, how do you do that? I know you're saying get out. I know most Democrats are saying, eventually, we have to get out.

What I have trouble getting a handle on, Mr. Soros, is when. What are you talking about?

SOROS: I — I think that we have to make it clear that we're going to get out. We have to actually threaten the people of the various groups, Sunni, Shia, and — and Iran. We have to threaten them that we are going to get out. And, therefore, they need to agree to some formula that will enable Iraq to live without civil war.

CAVUTO: Could you support Hillary Clinton?

SOROS: Of course. I would be delighted to see her as president.

CAVUTO: Even with her position, being in Iraq?

SOROS: I think that — I think that she also admits that it was a mistake. I think — look, I think...

CAVUTO: So, you could support her?

(CROSSTALK)

SOROS: Pardon?

CAVUTO: You could support her?

SOROS: Absolutely.

CAVUTO: Any Democrat, to you, is better than any Republican?

SOROS: No, not necessarily.

(LAUGHTER)

SOROS: But — but I think that — that what we really need to recognize, that — that everybody now understands going into Iraq was a mistake.

But I think the trouble started earlier, you see. I think this — we got into a false direction, because, if you had said 3,000 people were killed, so we have got to torture, kill, humiliate 20,000 people in Iraq — those are not the people who — who did damage to us.

CAVUTO: Well, I guess...

(CROSSTALK)

SOROS: Now we are doing to them something that we will not accept.

(CROSSTALK)

CAVUTO: Fair game. Fair game.

SOROS: Yes.

CAVUTO: But let — let me switch gears a little bit.

A lot of Americans who hear you, Mr. Soros, say, who is this rich guy who came to America, became a billionaire, to bash America and all this? And — and he urges that the rich have a responsibility. Yet, his, you know, Quantum Fund isn't even housed in this country. He's dodging taxes.

SOROS: All right.

(CROSSTALK)

CAVUTO: So, what I'm asking you is, they say, George Soros, hypocrite.

SOROS: Yes, allow me to tell you just a little bit about myself, OK?

I was born in Hungary. I suffered through Nazi occupation, communist occupation. I left the country. I became — I was a student. I adopted this idea of an open, democratic society as something worth fighting for.

And, when I reached — when I had $30 million, in 1979, I set up a foundation. And, since then, I have spent half my fortune on fighting communism and promoting democracy. I mean, I have been at it longer than President Bush.

CAVUTO: Mr. Soros, I tell you this. There is no disputing how generous you have been with your money. You have given better than $5 billion to a variety of...

(CROSSTALK)

CAVUTO: Here's what I'm asking you, though, all right?

Now, your Quantum Fund is registered, actually, in Netherlands Antilles. So, what I'm curious about is, when you advocate that the well- to-do should pay more taxes...

SOROS: Look, you are now...

CAVUTO: No, no, no, no, I'm just asking. Please.

(CROSSTALK)

CAVUTO: Do you see where some would say, wait a minute?

SOROS: No, no. Let me say two things.

First of all, I pay taxes. My fund is in — in — in Curacao. The foreign shareholders don't pay taxes. I pay taxes on my income from that fund. My management company is located here. We pay taxes. So, this is a lie, a lie that I have seen in print, and I have seen it repeated.

The other thing is — the other thing is...

CAVUTO: So, your taxes you pay in this country, are they at the — are they at the 35 percent rate?

(CROSSTALK)

SOROS: I would like to discus policy.

You are now falling into the trap of...

CAVUTO: No, no, no.

SOROS: ... your colleagues in FOX, who shall remain nameless...

CAVUTO: All right. All right.

SOROS: ... because I think they are so disreputable, I wouldn't want to mention their names.

CAVUTO: Mr. Soros, I don't — I don't think...

SOROS: I respect you. That's why I came here. All right?

CAVUTO: I don't think we...

(CROSSTALK)

SOROS: No, no, so, that — let's not get personal.

CAVUTO: What I'm asking you — what I'm asking you...

SOROS: Let's talk about policy.

CAVUTO: But — but, no, no, because this is part and parcel of the same story.

SOROS: Yes.

CAVUTO: The...

SOROS: The whole story.

(CROSSTALK)

CAVUTO: You...

SOROS: Let your public find out who I really am, what I really stand for.

I chose this country as my home, right? And I want this country to be worthy of the principles that have made it great. And now we are losing those principles. We are being misled. We need to correct it.

CAVUTO: You — you mentioned the personalities at this network. You meant Bill O'Reilly.

SOROS: Of course I'm meant Bill O'Reilly, but I really consider him disreputable.

CAVUTO: You don't like him at all?

SOROS: No, I think that he uses methods that I find unacceptable. That's why I wouldn't go on his show.

I'm happy to be here, but I have to stop you when you get personal.

CAVUTO: Well, the reason why I'm — I read a lot of books — I loved your book — and I loved Bill O'Reilly's book, "Culture War" — because he made some pretty strong remarks about you, Mr. Soros.

He said: "Soros is a smart, ruthless ideologue, who will stop at nothing to advance his secular, progressive offensive. He has no scruples, ethics, or sense of fair play" — a lot of nasty things said about that.

(CROSSTALK)

CAVUTO: People who said you're the Daddy Warbucks of drug legalization...

SOROS: Yes.

CAVUTO: ... that was a Democratic former HUD secretary — health secretary.

But does that bug you that, no matter what good you try to do, people come back and say, Daddy Warbucks, with evil intentions?

SOROS: Look, that is actually what — what pushes me to stand up.

You know, I supported people who stood up for freedom in — and democracy in — in countries like the Soviet Union. And, when I see that the principles of open society are undermined by people like O'Reilly, with his methods, then, I feel that I have got to stand up.

So, the more he insults me, the more I will stand up against it, because it's — he is using it — a remarkable trick. You know, he comes straight out of George Orwell, who wrote a book, "1984," you know, newspeak, that you — you say the opposite of what you mean. So, when...

(CROSSTALK)

CAVUTO: So, you are not a fan?

SOROS: What?

CAVUTO: You are not a fan?

SOROS: No.

CAVUTO: If we were to offer you, for example, "Factor" gear, you would say no?

(LAUGHTER)

CAVUTO: Let me talk a little, finally, about the economy.

I know you see a slowdown coming, Mr. Soros. Many agree with you. But is the slowdown you see coming next year a recession, or worse, a housing bubble that bursts, or worse?

SOROS: That actually is the $64 question.

And I honestly am very much on the fence about it, because there's no question that the housing bubble is being deflated. But there are other positive developments which may counterbalance it. So, is it going to be soft landing or a hard landing?

CAVUTO: What do you think?

SOROS: I — I don't — I don't have the answer.

But I think we will think it is a soft landing, even if it is going to turn into a hard landing. And that's where we are right now.

CAVUTO: You know, you don't get enough credit, but you're one of the most successful investors on the planet. The Quantum Fund, if you got in, in 1970, I think in — within the span of a decade, you made almost, what, 4000 percent, or something like that.

(CROSSTALK)

CAVUTO: But, lately, sir, not yours, but other hedge funds have come into trouble. Amaranth, you know, dissolves on a bad nat-gas situation. Just today, we're hearing Vega hedge fund is teetering, assets dwindling fast.

Are we set up for a hedge fund disaster?

SOROS: No, I don't think so. I think it's a self-correcting thing, you see. I think, actually, hedge funds are a very good way to manage risky money.

Now, people underestimate the risk, and — and the managers often over-leverage. There is a certain danger in the over-leveraging of — of hedge funds. But, on the whole, I think it will correct itself.

CAVUTO: All right.

The book is "The Age of Fallibility," the author, George Soros, one of the richest, also one of the most generous men on the planet.

Good seeing you. Will you come back? Done?

SOROS: Happy to.

CAVUTO: All right.

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