This is a rush transcript from "The Journal Editorial Report," April 5, 2008.

STUART VARNEY, FOX GUEST HOST: Up next on the "Journal Editorial Report," Bill's blowup and Hillary's "He can't win." — the latest salvos in the Democrats civil war.

Hold on to your wallets. The Congress is back in session and hungry for a housing bail out. We will tell you what they are planning and how much it will cost you.

A year after the massacre at Virginia Tech, are college campuses safer?

Plus, you our weekly "Hits and Misses," but first the headlines.

(FOX NEWS BREAK)

VARNEY: Welcome to the "Journal Editorial Report." I'm Stuart Varney, in for Paul Gigot.

It was a rough week in the bruising battle for the Democratic nomination with reports Bill Clinton blew up at a superdelegate over Bill Richardson's recent endorsement of Barack Obama. The Clintons have been lobbying hard for Richardson's support, with Hillary reportedly telling the New Mexico governor that Obama can't win.

Joining the panel this week, Wall Street Journal columnist Dan Henninger, columnist John Fund and, in Washington, columnist Kim Strassel.

First to you, John. Was Hillary playing the race card when she said he can't win, meaning that he can't win because he can't shake Jeremiah Wright?

JOHN FUND, COLUMNIST: I think everybody is claiming the race card is being played all the time. Barack Obama tried to transcend race and talked about a post-partisan environment but the reality is, the more we get into the Jeremiah Wright controversy, the more is about race.

So I think it is inextricably tied up with his candidacy and it is incumbent on Mrs. Clinton to be careful how she handled it, but also Mr. Obama in answering the Jeremiah Wright.

DAN HENNINGER, COLUMNIST AND DEPUTY EDITOR: Stuart, there is tremendous irony in telling somebody Obama can't win because, the fact is, her problem has always been electability. I mean, if you go way back to last year before the primaries even began, I can recall talking to lots of Democrats and, by in large, Democratic women, who would say they had real problems with Hillary Clinton. And I think that manifested itself in Iowa and New Hampshire.

There was a reason why she lost those elections to Obama. And it wasn't simply because he was a new face. She has her own electability problems.

FUND: She has more baggage than a cargo ship and everybody knows it.

KIM STRASSEL, WASHINGTON COLUMNIST: The reality is, if keeping on, they will both have an electability problem. There are polls out this week. It explains why you have Democratic Party leaders worrying that this is going on so long. Polls, a couple of them, show the unfavorability ratings among Americans of both Hillary and Barack Obama are creeping up, and moreover, more concerning the number of Hillary and Barack supporters saying, if my candidate doesn't win this nomination, I am going to vote for John McCain.

VARNEY: Let's look at the party over all, the Democrat party as a whole. Following this fight between Obama and Hillary, can the Democrats any longer keep the enthusiastic support, Dan, of Hispanics, African- Americans, women, white collar union members? Can they keep them all enthusiastically in that big tent?

HENNINGER: Well, I think by in large they can. but there is one group I believe they will have problems with and that's the so-called Reagan Democrats, blue collar types and such. You know, the more that Hillary and Obama run, the more they have to get out there and convey to people their agenda. Their agenda is actually quite traditional and liberal. There is nothing really new in it despite Obama's personal newness.

When you go into a place like Pennsylvania and expose that to deer hunt — white deer hunting blue collar workers, it gives them reason to say, you know, the Democrats are still not quite me. And those guys always looking for a reason to bolt to the other side. And John McCain will give them that.

FUND: Stuart, there has to be a reason why 85 percent of the country, on the one hand, thinks we are going the wrong direction, the highest in modern history. At the same time, John McCain leads both Clinton and Obama in the head-to-head presidential race. That is because the Democratic Party has not shaken its liberalism. The public generally perceives them, whether on foreign policy or domestic policy, to be left of center of the country. John McCain appeals to Independents.

Despite the weakness of the Republican Party and the sour mood of the country, John McCain is surprisingly competitive.

VARNEY: Kim, can the Democrats keep the white deer hunting union members of Pennsylvania in the fold, or voting for Hillary?

STRASSEL: This is the big question. The thing is, you heard Nancy Pelosi come out this week saying, OK, we have to finish this. We have to get this over. But they have a problem. The problem is Hillary Clinton made a very persuasive argument. She put this in terms of democracy. Do you have to let all states be heard before there is some decision made? I think they are still looking at several months yet of more of these nasty back and forths and finger pointing. And we don't though where that will leave the Democratic Party in June and what the fallout will be.

VARNEY: You don't think this is over after Pennsylvania or maybe after North Carolina if she is not convincingly winning the two?

STRASSEL: I think there are a number of leading Democrats, party elders, who are of the opinion that it would be more dangerous now to shut this thing down than it would be to let it go on because of the risk of alienating either Hillary supporters or Barack supporters.

VARNEY: My question stands then, John, is the Democrat party irretrievably split over the long term?

FUND: No, I think if you go back to 1968, that horrible convention in Chicago split by McCarthy and Humphrey, they had a close race with Richard Nixon. The same thing in other years. 1992, the Democrats had a contentious primary. In general, the party unites.

However, you are right. The level of enthusiasm matters. And if Barack Obama is dissed by Hillary Clinton or Hillary Clinton is viewed as being pushed aside by good old boys, then there might be a lack of enthusiasm that could dampen turn out.

VARNEY: If Hillary wins, will African-Americans support her in the general election? If Obama wins the nomination will...

HENNINGER: I think it could be a very significant problem for Democrats if Hillary wins.

VARNEY: That's what I'm talking about.

HENNINGER: Yes. The Democrats have had the hold of the black vote. We have said many times before, if blacks start voting for Republicans, it becomes very hard for the Democrats to win.

VARNEY: Why do I have a feel we will talk about this with a long time to come with great gusto and enthusiasm?

Still ahead, they are back. Congress returns from recess ready to overreact to the housing slump. A borrower bail out is in the works. We'll tell you how much it will cost you. That's next.

(COMMERCIAL BREAK)

VARNEY: They are back. Congress returned from recess this week ready to overreact to the housing slump with a taxpayer-funded borrower bail out.

We are back with Dan Henninger and columnist Mary Anastasia O'Grady and assistant editorial page editor James Freeman.

James, first to you. What exactly is being proposed in Congress and why is it, as I characterized it, an overreaction.

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: It is an overreaction. Unfortunately, Congress' overreaction may rub off on the American people. They have an interesting graph on the Gallup web site. If you look at it, people are getting more optimistic about the economy while Congress was on recess. Now they are back, opinion is starting down. There is gloom-and-doom.

VARNEY: What are they proposing?

FREEMAN: There is a mini bail out, which the Senate went for this week, spending about $15 billion tax dollars, but a one-time hit.

VARNEY: It would do what? Buy up foreclosed homes? Or buy up the mortgages?

FREEMAN: A bunch of tax incentives. $4 billion in community block grants. Years from now, there will be an accounting of where that money went. It is going to states and localities and they can take some of it, take a cut, and pass it to non-profit groups with little oversight.

There is a question of how much of that money will stick to the various fingers it goes through before it gets to the people it is intended to help. But the bigger bail out is further down the track. And that's Barney Frank in the House, Chris Dodd in the Senate.

VARNEY: Mary, if we put $29 billion worth of taxpayer money at risk in the Bear Stearns rescue — I will call it a rescue — why shouldn't we put taxpayer money at risk, put it on the table to bail out foreclosed homeowners.

MARY ANASTASIA O'GRADY, COLUMNIST: There is an argument that says if you did not do something about the Bear Stearns problem it would have become a systemic problem and that would have affected the whole economy. Whether you buy the argument or not, I don't think it justifies now going into these mortgages and supporting them.

Most of them were no money down, subprime mortgages where people bought they will on a speculative bet because they thought property prices would keep rising and they would flip them.

Now, 6 percent of mortgages are either in foreclosure or 90 days past due. That means 94 percent of Americans who have mortgages are slogging through this problem. They are doing the work. They are making their payments. Why should we reward the 6 percent that took a speculative that, when the majority of people are living up to their commit itself?

VARNEY: I'll answer your question. It is an election year. A politician who does nothing about 6 percent of homes that may be in foreclosure, maybe, maybe not, is going to be not reelected. It is politics.

O'GRADY: Wait. Maybe not. If the politicians explain to people that, hey, the other 94 percent of you are the ones who are paying for this, that's a much larger segment of the population.

HENNINGER: Interestingly, Stuart, John McCain seems to have picked up on this because he gave this fascinating speech in which he thought there was an issue of personal responsibility here, and he did not think it made sense to simply bail out all of these people who had gotten into trouble. This obviously runs counter to the prevailing thinking now in Washington.

And I think McCain is on to something. This is one — one thing that the American people understand in terms of economics is you buy a house, you try to save 20 percent to put it down. And then, one way or another, you make the mortgage payments. This is just fundamental. And I think it is really...

VARNEY: There a political calculation here which says that 94 percent of people who are current with their mortgages, doing the work, are not preached to bail out the 6 percent and feel badly about politicians who do?

FREEMAN: That's exactly right. I think McCain may have the better political math here. You have got 20 million or more people who paid off mortgages. Do they want to pay somebody else's mortgage? You have 35 to 40 million renter household? A lot of these are people who have been struggling to afford a home. They are going to pay for the people who bought the homes they couldn't afford?

VARNEY: But it is easy to demagogue from the other side and say these poor people were bamboozled into those lousy loans. They were pressured into these lousy loans.

FREEMAN: That's been the narrative. This is the idea that the Democrats have been trying to sell. I borrow money from you. I don't pay you back. Therefore I am the victim.

And the reason they may not get over the goal line with this is because there are a lot of holes in that. You look at a Boston fed study, basically people tend to walk out on their mortgages when the value goes down, not because they were fooled or because they hit economic hardship.

O'GRADY: There was a lot of fraud we are finding out both on the part of borrowers and lenders. And remember, if you bail out the so-called homeowners — and a lot of them are not actually the people who live in the homes, they are people speculating on property — if you bail them out, you also bail out the lenders. And those are institutions who lent very aggressively, saying to people, no money down, sign here on the dotted line.

Now, you are asking American taxpayers to make those folks whole? I don't think people will go for it.

FREEMAN: That's the essence of the Frank-Dodd bill. You are letting lenders unload their worst loans in their portfolios and you're refinancing people who have not been paying into a taxpayer-insured bail out. So basically, all of the mistakes of the sub prime market are going to be done again, except with taxpayer on the hook.

VARNEY: Would you agree with the following statement? At the end of the day, when we have gotten through any bail out, the end result of this will be that people, who are not qualified for a mortgage in the conventional sense, will not get a mortgage? A large chunk of the population will be squeezed out of the mortgage market long term?

FREEMAN: No. If prices come down to their natural level, a lot of people who want to afford a home can. You wonder where are all the affordable housing advocates now. The essence of the Frank-Dodd bill is to bail out borrowers who otherwise would not qualify. Saying, you have a bad credit history. You didn't pay your mortgage. You are borrowing more than you should relative to income. No problem, taxpayers got you.

VARNEY: At the end of the day, Dan, regardless of morality, do we get a bail out?

HENNINGER: I think we do get a bail out for the reason you said. The politicians, by and large, are not going to sit there and have someone say you did nothing.

VARNEY: All right.

When we come back, it is a year since the Virginia Tech massacre. Are students safer on college campuses?

The government is proposing new rules that you need to know about. And that's next.

(COMMERCIAL BREAK)

VARNEY: It has been a year since a 23-year-old Virginia Tech student went own a campus shooting spree that left 32 people dead. Though classmates, professors and administrators all noticed signs of Cho Seung- Hui's mental instability, nobody manage to connect the dots, perhaps for fear of violating federal privacy rules. Now the Department of Education is proposing changes to those rules commonly known as FERPA, or the Family Education Rights and Privacy Act, FERPA.

We are back with Dan Henninger and Kim Strassel. And joining the panel is the "Wall Street Journal" deputy taste page editor, Naomi Schaefer Riley.

Naomi, to you first. What changes are being proposed here? How will these effect campus safety?

NAOMI SCHAEFER RILEY, DEPUTY TASTE PAGE EDITOR: The two most significant changes being proposed are, first, giving administrators more latitude. The department is saying, if you share this information with professionals, about student's mental health, we are not going to second guess you later.

VARNEY: Right now you can't, right?

RILEY: Right.

VARNEY: You can't share that kind of mental and discipline things with them.

RILEY: Mental health issues, unless you are absolutely positive that this person will pick up a gun tomorrow and start shooting, because not only could you lose federal Funding if you do, but you could be sued by families that say, oh, you shouldn't have done that and you violated our child's privacy.

The second thing is that I think it does is it brings parents back into the equation here and allows administrators to share with parents information, not only about student's mental health, but about their grades, discipline and any other things that may effect that child's education or well-being.

VARNEY: Now, in some instances since the Virginia Tech shooting, there have been occasions when mentally unstable students have gone on a similar, although not as dangerous, a rampage as this young man.

RILEY: Right.

VARNEY: Would these changes have altered those situations?

RILEY: Well, it is hard to say. There was a case at the University of Illinois. It is hard to say there. It is not clear who knew that person went off their medication. But I think one thing that is clear is, the more people involved in a young person's life, who know that this person is mentally unstable, is having problems I think the more people who feel like they will be empowered to be able to stop something at the first sign of danger.

VARNEY: Kim, I have to say it seems to me to be a middle of the road or tenuous proposal when we talk about campus shootings here. We are not doing very much, are we?

STRASSEL: Well, look, everything Naomi said is correct. To the extent the department of education is doing something, good; if it makes it more clear for administrators, great.

But talk about first principles here. There used to be a time when schools were private institutions when they could decide who came in, who they threw out, when they called parents, what you would accept.

Why do they have to follow the rules now? They follow them because they accept federal taxpayer dollars. There was a point at which universities decided it was more important to take federal money than it was to maintain some of the control over their own schools. So they made these deals.

You know, if you wanted to make a big change and wanted to assert control again, maybe you should give up some of that federal money. And there are schools out there that do that. And they actively promote the fact that they do and they have control over their schools.

RILEY: We should also emphasize here, it is not just the money. It is the legal liability the schools are at risk for. Right now, the Virginia Tech families of victims have been offered $100,000 each and a lot of people think Virginia Tech will get off easy. The lawsuit may have been higher.

HENNINGER: As a result of legal liability, they, by and large, would do nothing. This is a piece of the Supreme Court decision that affected discipline in high schools. Principals still have latitude to do something, but their attitude became, I am not taking a risk with the liability, therefore I do not think, therefore discipline plummets.

The same thing happening with FERPA on colleges. Administrators say we don't understand the law. It is too complex. In fact, get this. The Department of Education's office in charges of this is Orwellian. It is called the Family Policy Compliance Office. It's bizarre.

VARNEY: I am inclined to say there is nothing you can do about this. These proposals don't make a crack in this problem.

RILEY: It is very hard. Administrators are caught between a rock and a hard place. If you talk to smart college administrators — and I have talked to a couple of college presidents about it. They say FERPA is standing in the way of them taking a in loco parentis stance toward their students. I think it is about time that — since we don't think of college students as full grown adults in it country — let's be honest — it is time to think about the fact that we put them on these campuses and we expect someone to take care of them.

VARNEY: I am missing something. Here you have a formal privacy policy, which we adhere to via lawsuits, yet you have the Internet, which is a gross invasion of personal privacy on so many levels, and it is absolutely ubiquitous.

What's — go ahead, Kim. What am I missing?

STRASSEL: One reason — to follow on Naomi's point, one reason this is an issue, it was back when this law came, is because we decided we didn't know how we would treat college students. Were they adults? Were they not?

One thing that's interesting is people are looking at this now and saying, if you are claimed as a dependent by your parents on a tax return, you are still under their authority. Maybe that's one way to look at it too and draw a line there in terms of giving greater latitude to officials.

VARNEY: Last word, Dan.

HENNINGER: To your point, Stuart, about the Internet, sure we need a law for privacy in our time, but look at what happened with this law back in 1974. It is just impossible to put this into legislation.

VARNEY: We have to take one more break. When we come back, our "Hits and Misses" of the week.

(COMMERCIAL BREAK)

VARNEY: Winners and losers, picks and pans, "Hits and Misses," it's our way of calling attention to the best and the worst of the week.

Item one, fall of the king — Dan?

HENNINGER: Stuart, you know, all the ancient truths have been overturned when we learn, as we did this week, that Mariah Carey has replaced Elvis for producing the most number one hits. What is more, Madonna has passed Elvis for producing the most top 10 hits.

Now, Mariah Carey's number one hit is called "Touch my Body," which shows how far the culture has come since "Love Me Tender."

(CROSSTALK)

HENNINGER: Now, listen. There's one lesson. In pop music, people like Mariah Carey and Madonna are still called divas, but in the real world of rock 'n roll, there is still only one king.

VARNEY: Now was that a hit or a miss? I can't work it out. I will figure it. Don't worry.

Next question, did your doc operate on the wrong body part? One insurance company said it will no longer foot the bill, so-to-speak, for medical mess ups — Mary?

O'GRADY: This week I have a hit for Well Point, a health insurance companies that says it will no longer pay for operations that are done on the wrong body part, the wrong patient or the wrong on operation done on a patient. It also will not pay any longer for the removing of objects left in the body after an operation. And I would say this is a hit, because hopefully it will inspire hospitals to be more careful.

VARNEY: The hospital will have to pay as far as Well Point is concerned?

O'GRADY: That's Well Point's position.

VARNEY: They don't pay already. I can't believe this.

O'GRADY: No. Right now, they, the insurance company, picks up the charges for trying to rectify what went wrong.

VARNEY: Thank you for identifying a wonderful hit.

Next one, a hit and a miss for Ted Turner — Naomi?

RILEY: Well, Stuart, this week, Ted Turner announced he was giving $200 million to fight malaria. He was going to work with two religious organizations giving the money privately to help Africans fight malaria. This was a great thing. He has given up on corrupt African governments to help them accomplish these goals.

In the same week though, he also managed to tell us that most of the people in the world will have died and the rest of us will be cannibals as a result of global warming.

Now Ted Turner is worried about overpopulation. I don't know why he is trying to save lives in fighting malaria.

VARNEY: Do you suspect, like I do, he, with that statement on cannibalism, wanted to get back into the headlines?

RILEY: I can't imagine there is any other reason.

VARNEY: You don't think he means it? He is a true believer, you know.

RILEY: I can't read the man's mind. It is hard to say.

VARNEY: Thank you, Naomi.

That's it for this week's edition of the "Journal Editorial Report." Send your e-mails to jer@foxnews.com and visit us on the web at www.foxnews.com/journal .

That's to my panel and to all of you for watching.

I'm Stuart Varney. Paul's back next week.

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