This is a rush transcript of "Special Report With Brit Hume" from March 27, 2008. This copy may not be in its final form and may be updated.

BRIT HUME, HOST: We're pleased to tell you that at least one of the British news services got it right about Hillary Clinton's entrance into Bosnia back in 1996.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Hillary Clinton made a dramatic entrance into war torn Bosnia as she piloted to a jumbo jet to a safe landing.

Unfortunately for Mrs. Clinton, some of the hardest fighting the human race has seen was currently raging going on, with routine attacks on both sides.

Top generals agree there is no place more dangerous and sniper ridden than Bosnia right now.

Our noble and brave first lady took time away from dodging attacks to shake hands and smile, and, yes, even showed up a little marksmanship on a terrorist hiding under a tank.

One of the most dramatic moments came as the "h-bomb," a nickname given to her on this trip, was hugging a young girl. Sniper fire struck two young men standing nearby, leaving them shaken and impressed by Mrs. Clinton's calm composure under fire.

(END VIDEO CLIP)

HUME: That at least is how Hillary Clinton seemed to portray it in the account that she has now admitted was a little bit of a tall tale.

Some thoughts on this whole thing from Bill Sammon, Senior White House Correspondent of "The Washington Examiner," Mort Kondracke, Executive Editor of "Roll Call," and Nina Easton, Washington Bureau Chief of "Fortune" Magazine, FOX News contributors all.

All along I have been expecting when this thing blew up and it became clear from the pictures that the networks had that nothing like she described of the corkscrew landing and dodging sniper fire ever occurred, that she would say I made a mistake. I mixed it up with a landing I had somewhere else.

No such explanation has been forthcoming, suggesting this thing came out of whole cloth. What to make of that, Nina?

NINA EASTON, FOX NEWS CONTRIBUTOR: One of the big problems with this, it wasn't just an offhand remark in an answer to a question, or something. This was in a delivered speech. And it was a fairly graphic description of arriving, thinking we're going to get a welcome --

HUME: Cancelled welcoming ceremony --

EASTON: Welcoming ceremony, when in fact we learn that an eight- year-old Muslim girl actually was there handing her flowers, and leading officials.

So it wasn't like it was a mistake. It was in a delivered speech.

And I think there's a couple of things that are dangerous for her here. One is sort of parsing, going into the avenue of I didn't inhale; I didn't have sex with that woman -- Clintonian problem. And the second thing is --

HUME: But this wasn't parsing. It was an outright whopper, right?

EASTON: That's right. This was a whopper.

And then it also opened her up to this whole question that she is running largely on the idea that she was in the White House all these years, and that she was at least somewhat involved in some major decisions and some major policy making.

And this opens up that whole Pandora's Box about -- as do the records released of her during those White House period, which don't tell us a lot -- but it raises this whole question about what she really did, and was she really involved in serious stuff?

BILL SAMMON, SENIOR WHITE HOUSE CORRESPONDENT, WASHINGTON EXAMINER: It reinforces her image as someone who has difficulty telling the truth. That's why this has stuck.

Hillary's people have put out all these instances where Barack Obama supposedly exaggerated his role as a community organizer, or whether he was a constitutional law professor, et cetera, and it kind of falls flat.

I remember when we covered the Gore-Bush race in 2000 -- you get media perception templates. Gore was the serial exaggerator, Bush was the dummy. And Bush would make an exaggeration and it wouldn't go anywhere. But if Gore made an exaggeration, it reinforced that perception, so it got all kinds of media attention.

That's why this lying thing is getting traction with her because, since the '90's, she has been known -- I remember Safire called her a congenital liar over file-gate, Robert Ray, the special prosecutor, said that she had made a factually false explanation on travel-gate. You had Whitewater.

"Time" took a poll -- I looked this up -- "Time" magazine took a poll: 52 percent of Americans felt she was lying about Whitewater; 27 percent thought --

HUME: Let's look at the current poll that we have on candidates as being seen as honest and trustworthy. Look at this: McCain gets 67 percent. Obama does very well. And look at her, and it does appear that this may stick.

Mort, what are your thoughts?

MORT KONDRACKE, EXECUTIVE EDITOR, "ROLL CALL": The Pew Poll has a poll among white Democrats asking them who is hard to like -- Obama 13 percent, Clinton 43 percent. This is white Democrats. This is her constituency.

Bill is right, every once in a while, something happens which kind of crystallizes thoughts and prejudices about a candidate, and this may be it for Hillary Clinton on the issue of trustworthiness. Dick Morris, who hates her, of course -- former White House aide -- has a whole list of things.

And one that hasn't been explored yet which I think deserves to be explored is the pardon of 16 Puerto Rican members of a terrorist organization the FLAN in 1999 at a time when she was running for the U.S. Senate in New York State and Puerto Rican politicians wanted these guys to have clemency, and Bill Clinton gave them clemency.

And the question is, what did she know, and when did she know it about that?

HUME: What does she say? She says --

KONDRACKE: She said at first she was in favor of it, and when they refused to renounce violence, then she turned against the pardon. But the question is, how much did she have to do with actually getting the pardons?

HUME: But what is the wellspring of this and her? You see -- candidates trim and they fudge and they exaggerate, but you don't usually see just outright howlers. What is going on here?

KONDRACKE: Well, I think she has gotten away with it in the past and managed to bull her way through. She got through the --

HUME: It is resume padding, in a way.

KONDRACKE: Yes. And the billing records, all that stuff, it seems to be Teflon.

SAMMON: It's part of her character.

KONDRACKE: So far, she has, too --

HUME: Not with those numbers, as you see.

KONDRACKE: Not now. That's the question, is it --

SAMMON: Her inclination is to prevaricate, whereas John McCain is always compulsively telling you, oh, I made that mistake, I made that error. It's the exact opposite --

HUME: He called us all jerks, and you know he's not lying about that!

SAMMON: That's true.

HUME: When we come back with our panel, what the three leading presidential candidates say about the U.S. economy and about each other's proposals for it. Don't miss this, this is going to be a real thriller. That's next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: I will not play election year politics with the housing crisis, that it's not the duty of government to bail out and reward those who act irresponsibly, whether they're big banks or small borrowers.

SEN. BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: John McCain recently announced his own plan, and, unfortunately, it amounts to little more than watching this crisis unfold.

SEN. HILLARY CLINTON, (D) NEW YORK: I read the speech that Senator McCain gave the other day, which set forth his plan, which does virtually nothing to ease the credit crisis or the housing crisis.

(END VIDEO CLIP)

HUME: Well, we're shaping up for a good old liberal-conservative argument on the economy this fall if this debate continues. McCain has some things he wants to see done, but they don't amount to the kind of plans that Barack Obama and Hillary Clinton say they would like, although the Obama plan is exceedingly vague.

So what about this issue, and what about the stands that the candidates are taking-Bill?

SAMMON: You say liberal-conservative -- the big aggregate picture, you're talking about the Democrats want to roll back the Bush tax cuts, which is another way of saying raise taxes, and, secondly, they are trying to characterize what we're in right now as a recession.

Now, we may ultimately end up being in a recession, but words mean things, and we're not in a recession now, because you need two quarters of negative growth --

HUME: We could be in one. This could be the first of two quarters.

SAMMON: You would have to have two, so we couldn't really be one, technically yet, unless we got into the second quarter of that --

HUME: You never know until it's over.

SAMMON: You never know until it's over.

But this happened in '92 -- the Democrats very successfully portrayed a very weak economic time as the worst economy since the depression, and we were in a recession.

But in reality, there were, like, six quarters of positive growth in the GDP the last six quarters of elder President Bush's were actually, technically, an expansion, and as soon as Clinton got in there, suddenly the economy is looking pretty good.

HUME: The last quarter of that year, '92, was robust growth, but --

SAMMON: It was too late, the perception was set in.

KONDRACKE: When you have someone like Alan Greenspan saying that this will be the most challenging, wrenching period in the economy since World War II, you have to take it a little more seriously than you do '92.

HUME: I understand, but what about the proposals of the candidates?

KONDRACKE: OK. McCain, although that sound byte and the press reporting indicates that he is strictly laissez faire, hands off, he's not, really.

He talked about limited assistance -- he didn't describe it in detail -- temporary methods of helping borrowers who might lose their homes. He's talking about regulation to ensure accountability and transparency in these funny new financial instruments and the credit agencies that had been giving them AAA ratings when nobody knew what was in them and so on, and he's talking about lending standards. So it's not exactly laissez faire.

And in their speeches today, Obama, although he had a lot of populist rhetoric, was basically coming out with the same sort of thing, a 21st century regulatory regime, which is what the administration is talking about as well.

EASTON: I agree with Mort. Obama's speech was especially interesting today. I thought Hillary's was not interesting. It was the same old. And we've heard it from Obama, too. It is hard to separate them on the populist rhetoric, the Main Street versus Wall Street. We have heard that over and over again.

But Obama's speech was actually fairly thoughtful, and, frankly, wasn't that different from what Hank Paulson is saying.

HUME: It's vague as the Dickens, though, wasn't it?

EASTON: It's vague, but so is -- is the Treasury Secretary vague when he says we have to update our regulatory system?

HUME: Didn't he propose that financial institutions do a better job of managing risk? What does the President of the United States have to do with that?

EASTON: I agree, he doesn't have anything to do with that, clearly.

If you have Democrats there will be higher taxes, there is going to be more regulation. But I think if you look at Obama's speech today, in contrast, frankly, with a lot of his past speeches, it was more in line with what Treasury Secretary Hank Paulson is saying, what John McCain is saying.

It is true that the financial markets today aren't governed -- don't have a supervisory regulatory system that is 21st century, that can monitor what they're doing and maintain stability in the market.

KONDRACKE: One other point. I think -- Steve Ratner(ph) who is an investment banker and is a Hillary supporter, wrote an Op Ed piece in the "Washington Post" today declaring as stupid and panicky the Hillary Clinton suggestion that there be a moratorium on foreclosures.

HUME: But if you look into that proposal, it turns out it's voluntary. So she's proposing a voluntary freezing of interest rates -- that's voluntary.

KONDRACKE: Well, I wasn't aware that it was voluntary.

HUME: So far, that's what it is. She might expand it.

SAMMON: That's the thing about all these programs. At this stage of the game, 99 percent of this stuff is never going to get enacted. These are people making broad statements.

HUME: And a lot of it is kind of vague, and it's more music than it is the score.

SAMMON: Right. I mean, even if McCain gets in and says we're going to make these tax cuts permanent, he may not have congressional support to get that accomplished.

HUME: Because it would be like enacting a tax cut.

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