This is a rush transcript of "Special Report With Brit Hume" from August 27, 2007. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

ALBERTO GONZALES, ATTORNEY GENERAL FOR THE UNITED STATES OF AMERICA: I often remind our fellow citizens that we live in the greatest country in the world, and that I have lived the American dream. Even my worst days as Attorney General have been better than my father's best days.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES OF AMERICA: After months of unfair treatment that has created a harmful distraction at the Justice Department, Judge Gonzales decided to resign his position, and I accept his decision. His good name was dragged through the mud for political reasons.

(END VIDEO CLIP)

BRIT HUME, HOST: So thoughts now on the resignation of Attorney General Gonzales from Fred Barnes, executive editor of the Weekly Standard, Nina Easton, Washington bureau chief of "Fortune Magazine," and syndicated columnist Charles Krauthammer, FOX News contributors all.

Well, Gonzales didn't give any reasons, but I think we all know, obviously, what he was embroiled, which was a series of investigations stemming, mainly, from two things.

One was the firing of a number of U.S. attorneys, something that the president, and the attorney general, for that matter, have a perfect right to do, but which he managed to allow to become a scandal.

And secondly, questions about some of the various surveillance programs the administration has turned to in the war on terror, which were, arguably, in the eyes of some, anyway, not legal, and not properly supported by the statute.

So, Fred, what now, and what about this?

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: Well, obviously, Alberto Gonzales was a drag on the administration. I think President Bush is better off the last 16 months that he's gone.

Everything that I've been told today was this was done not at Bush's request, but that Gonzales himself decided to go by the Josh Bolten rule — he is the White House Chief of Staff — that if I'm not out by Labor Day of the year before…

HUME: I'll stay to the end.

BARNES: I'll stay to the end. He wasn't ready to stay to the end. And he was getting battered. Look…

HUME: Getting battered, you say.

BARNES: He was getting battered by Democrats, by the press, by people inside the administration, inside the Justice Department itself.

And what the president needs is a strong attorney general with credibility on the big issues that are going to come up just in the next few months. One is warrantless surveillance of terrorists that you talked about. Another one is the interrogation of terrorists. And there's the whole question of Executive Power.

The president needs somebody with credibility who can defend him on that. And Alberto Gonzales wasn't going to be the guy that could do it.

My candidate would be Larry Silverman, the appeals court judge, who was very tough, very strong, very smart, and very credible.

NINA EASTON, WASHINGTON BUREUA CHIEF OF FORTUNE MAGAZINE: It's funny, Fred, because you say it was a drag on the White House, and I think six months ago a lot of us were saying, for damage control, this guy should resign. It would be in the White House's interest to resign.

But, in fact, it had this perverse effect of, in some ways, you could argue, helping the White House.

HUME: How so?

EASTON: Congressional approval ratings — what are they now? Eighteen percent — historic lows. He became the centerpiece of a new Democratic Congress that was focused on investigation. And it has rebounded to the detriment, I believe, of the Democrats.

They weren't able to get front and center on the agenda. They got some pieces through, but not a lot. They got focused on this. And as the Republicans like to say, there's something like 600 investigations going on now, and subpoenas. But it's interesting, and we're going to see more of this, I think. No matter who the nominee is, we're going to see this more political debate over this.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: But he was a drag on the administration. He was a dead man walking for six months. He walked a long way before he decided to leave the scene. But you could see the reason he left and the way he left if you compare the bytes we saw, Gonzales with the president. He kind of slinked away. He didn't answer any questions. He invoked his humble origins.

HUME: He gave no reason.

KRAUTHAMMER: Didn't give a reason or a defense. The president went out there and said he was unfairly treated, and it was a political lynch mob, et cetera.

When Gonzales was in front, particularly when he had an easy case, as you mentioned, the case of the firing of the attorneys, all he had to say is "They serve at the pleasure of the president. Of course the White House is involved. Why wouldn't it be?"

He never made that case. He was very weak in his responses. It was not a question of wrongdoing, it was a question of a man who was over his head.

And I agree with Fred — there's a real opportunity here. On the issues that are going to come up, on the renewal of the FISA law, which is listening in terrorists, and on interrogation of terrorists, the country is with Bush. He need somebody strong.

If we have a debate over these issues in committee, the president will win. And that's why I think Silverman would be an excellent choice, or Ted Olson, the former...

HUME: But what if the Democrats decide, as well they might, as Senator Leahy — one could imagine Senator Leahy saying, "Look, we've got incomplete investigations here. We have the White House refusing to turn over materials and to require witnesses, such as Karl Rove, that we want to hear from. And until that is done we confirm no one."

KRAUTHAMMER: The country won't buy it. The president will go out there and say "We have terrorists who are talking on the internet and we don't have the laws to actually listen in. And the Democrats are stopping me from appointing an attorney general who will protect America." That's all he has to say, and the Democrats will lose, and they will cave.

HUME: Do you agree with that?

EASTON: I think it's a dangerous time for the Democrats, I agree. I don't think is completely with Bush on this, but I do think this whole thing that the Democrats have latched onto, the civil liberties question, it animates about 1/3 of the voting public.

Everybody else is a little more complicated about it, and are willing on some level to curtail civil liberties if they feel it's protecting them against a terrorist attack. Those issues are going to come front and center with the next nominee.

And, by the way, the name Chertoff came out today, and then was put back in the box. But I'm hearing that he actually could be nominated as early as tomorrow.

But I do think it's a nomination that's going to be held up. The acting attorney general is going to have to stay in that position for the 200 days, or whatever it's going to take, while this plays out.

BARNES: I don't think you want somebody from inside the administration. Chertoff, you'd have three weeks of questions about Katrina, and you don't want to live through that again. The Democrats would, because they think it's a great issue to use against Republicans.

Look, Bush needs somebody who is very strong, who can make the argument in all these cases, and reject things by Democrats, and not promise to send up Karl Rove or agree to a special prosecutor for this or that.

HUME: When we come bag, Hillary Clinton and the allegations that she is politicizing terrorism. That comes from Democrats. Stick around.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN HILLARY CLINTON, D-N.Y.: If certain things happen between now and the election, particularly with respect to terrorism, that will automatically give the Republicans an advantage again, no matter how badly they have mishandled it, no matter how much more dangerous they have made the world. And so I think I'm the best of the Democrats to deal with that as well.

(END VIDEO CLIP)

HUME: So she's not saying she's the best of the Democrats to deal with terrorism itself, although she may otherwise contend that. But what she's saying in that sound byte, it seems, is that if the Republicans try to politicize terrorism, she's the one to respond to. Correct, Fred?

BARNES: No, that's not the way I read it. I think she was right on both counts. She was saying, look, we have this terrible issue of terrorism, and something may happen again, and that normally helps Republicans. But I can deal with this. I can take Republicans on on this issue.

HUME: It automatically give the Republicans an advantage again, no matter how badly they've mishandled it.

BARNES: I think we all agree with that — on national security and fighting terrorists Republicans have a better — the public thinks they're stronger than Democrats are.

HUME: So she's been accused of inappropriate politicization of the issue. Fair?

BARNES: No, that's not fair at all. She's stating the obvious.

EASTON: She's stating the obvious, and it's one of those obvious things you say in political strategy sessions, not out in public.

HUME: What's wrong with saying that?

EASTON: I think it looks like political calculation. This is a campaign, by the way, that's been so good at avoiding missteps. But it also looks like they're politically calculated. And if she feeds into that, and a lot of the blogosphere today was taking her on over this, I think it hurts her with the liberal wing of the party.

By the way, she and her husband have, apparently, at fundraisers several months ago, said the country is more at risk of a terrorist attack after a new president and the testing of a new president, and she has said that she could handle it in that case.

KRAUTHAMMER: I don't think her statement is obvious, and I don't think it's true, actually.

If a terror attack happens near election day, yes, it will help the Republicans. But if it happens early in 2008, the Democrats will argue that this administration and the Republicans have stood on one main item — we have kept you safe — and they haven't.

I think it would take two weeks of a decent interval, and Democrats would begin attacking successfully the Republicans on national security. So I'm not sure that's a true statement.

But as to how impolitic it was, it is absurd to say that it's off the base to discuss terror. There's a quote from Obama who says "No one in politics, regardless of party, should play politics with an issue as grave as our national security."

It's the issue of our time — of course a political issue. It can be discussed, and ought to be discussed in every way. And to imply that, somehow, it's out of bounds I think is absurd.

Democrats have done this — accusing Rove and Republicans in 2006 of using terror and fear as a tactic. And now Hillary is talking about the same issue, and the other Democrats are shocked that anybody is implying that you can discuss a terror attack. Of course you can.

BARNES: I remember Obama was asked a question at the first Democratic debate about a terror attack. And remember what he said? I think the question was "What would you do if there was a terror attack?" And Hillary said the first thing she'd do would be to retaliate.

HUME: And she jumped in with Obama in giving what she obviously thought was a weak answer.

BARNES: Now, Obama, if he felt so strongly about it, he could have said "Wait a minute, wait a minute, that question is out of bounds. You can't be asking about national security and a terrorist attack because we can't talk about that."

Of course, that's not what he said. He gave an answer. It wasn't a good answer, but he answered it, he didn't complain. I don't know how he dreamed this rule up thumb now for politics.

EASTON: He's trying to get back in the game after, obviously, being thrown off balance over national security issues, himself.

HUME: By the way, is he stalled out?

EASTON: I don't think so.

HUME: What do you think?

KRAUTHAMMER: Yes.

HUME: You think he's stalled out?

KRAUTHAMMER: Absolutely.

HUME: Do you think so, Fred?

BARNES: No, not at all.

KRAUTHAMMER: He's on a glide(ph) path.

HUME: To nowhere, right?

KRAUTHAMMER: Well, the vice presidency, perhaps, but not the Presidency.

BARNES: I think he's a lot closer than people think. And, remember, John Kerry was at 18 percent six or eight weeks before — and he gained 20 points in the last — look, he's close enough.

HUME: That's it for the panel.

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