This is a rush transcript of "Special Report With Brit Hume" from June 16, 2008. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

REP. JEB HENSARLING, R-TEXAS: If Congress has time to set up hearings about the living habits of the polar bear, surely it can find time to have a congressional investigation on sweetheart deals for mortgage lenders to members of Congress.

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BRIT HUME, HOST: What he's talking about is the fruits of an article by Conde Nast Portfolio magazine, which said that the number of U.S. senators to include Senate Banking Chairman Chris Dodd and Senate Budget Chairman Kent Conrad have received loans as friends of Angelo Mozilo, the head of Countrywide Financial, the mortgage lender.

And both men say they don't know the guy really, but they got these loans anyway under a special program, and they appear to be at quite preferential rates. There were some others as well, including former Bush HUD Secretary Alfonso Jackson who got such a loan.

Now, some thoughts on this from Mort Kondracke, executive editor of Roll Call; Mara Liasson, national political correspondent of National Public Radio, and the syndicated columnist Charles Krauthammer — FOX News contributors all.

Here is what the two senators in question both say. Dodd, Democrat of Connecticut: "As a United States senator I would never ask or expect to be treated differently than anyone else refinancing their home. The suggestion is outrageous and contrary to my entire career in public service."

From Senator Conrad, Democrat, North Dakota, "This article seeks to leave the impression that I somehow have done something wrong with respect to these loans. That is totally and completely false. I have done nothing wrong with regards to these loans."

Conrad at first said that he did not even know Angelo Mozilo, but it turns out he did after all talk to him on phone.

So, Mort, what about this? Is this a scandal that will blow over, or is this just not even a scandal?

MORT KONDRAKE, EXECUTIVE EDITOR, ROLL CALL: Well, it's a small scandal, and it's embarrassing to the people involved in this. It's not a lot of money — $2,700 a year for Dodd and a total of $10,500, apparently, for Conrad.

But if you try to take a Senator to a baseball game, he supposedly can't take it. It violates the gift ban for $50. You're not allowed to do that. so this is over the line, and they should be getting bad publicity, and they are getting bad publicity for it.

The question is what was at the bottom of all this? Why did Mozilo make these loans, and he made them to Jim Johnson, former head of Fannie Mae —

HUME: Who did a lot of business with Countrywide.

KONDRACKE: Yes. And Franklin Raines, who did a lot of business, and Alfonso Jackson, who was the Secretary of HUD, and Dodd, of course, is the chairman of the committee that oversees housing, among other things —

HUME: And banking.

KONDRACKE: Banking, yes.

So the suspicion here is that Countrywide was getting favorable treatment from Fannie Mae. In fact, 26 percent, according to The Wall Street Journal, of the single family home mortgages that Fannie Mae purchased were Countrywide loans, as opposed to say four percent from the gigantic Bank of America.

So it looks on the surface as though what Mozilo was doing was buying protection for this cozy deal that he had going with Fannie Mae. That may deserve an investigation.

MARA LIASSON, NATIONAL CORRESPONDENT, NATIONAL PUBLIC RADIO: Look, I think that this is a scandal, and it's snag a lot of people, mostly Democrats so far. The only ingredient missing is somebody who is actually up for reelection this year, and there hasn't been one yet.

But I think there will be an investigation, and it will probably turn up more of this preferential treatment.

HUME: But it does appear to be a violation of the congressional gift ban.

LIASSON: Yes. For Conrad to say he did nothing wrong — well, he might have done nothing wrong himself, but he got something that might have violated a rule, and that's —

HUME: If it's banned and he did it, what do you mean he did nothing wrong?

LIASSON: Well, yes.

KRAUTHAMMER: I agree with Mort, it is not yet a scandal, it is a "scandalette." And I'm always amazed by how little it takes to get a congressman to cross a lake — a few hundred dollars, a few thousand.

And you're right, if it is a favor, it would be illegal and it would be wrong.

HUME: Or at least against the rules.

KRAUTHAMMER: Yes. It would be against House Ethics rules. I don't know if it would end up in court, but clearly it would require a reprimand from the Ethics Committee.

The reason that it could be serious is because here you have people who ultimately regulate and pass the laws, unlike Johnson, who is dealing with Fannie Mae as a client of sorts.

At least, if you pass a law, you have the force of law and police and the courts behind you, and that is why people are more careful in regulating the cozy relationship between a member of Congress, and particularly a chairman of the powerful committee, and a private enterprise. I think that these guys have a lot of explaining to do.

And the reason it stings is because almost all of these people are Democrats who have a penchant for blaming great national crises on corporations and individuals. It is populist nonsense, but they do it all the time.

And you've got Dodd, for example, who had one of these deals going, who attacked Countrywide publicly for its abuse of practices, as if that really is the cause of the mortgage crisis as opposed to a lot of other factors, which everybody you know is going on at the same time.

KONDRACKE: I have always thought that the whole Fannie Mae scandal — there was a huge scandal over Fannie Mae, and Franklin Reigns, who was the CEO —

HUME: The financial reporting scandal.

KONDRACKE: Yes, basically what they were doing was pumping their earnings in order to get the huge bonuses that were not available if they didn't have certain earning levels. And they fabricated — the top executives fabricated earnings reports in order to get the bonuses.

And they were slapped by the Oversight Commission that oversees this. But they avoided criminal charges, and I don't know that — it's been a financial page scandal, but not really a front page scandal. And this kind of thing could bring it to the fore.

HUME: President Bush says the U.S. and Europe enjoy an unprecedented relationship. What is he talking about? We will weigh in on that, next.

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GORDON BROWN, ENGLISH PRIME MINISTER: The special partnership that President Bush and I both agreed today is a partnership not just of governments but of peoples. It is driven forward not simply by mutual interests but by our shared values.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES OF AMERICA: The fundamental question of history will look back on is that we understand the duty we have been called to do, to protect ourselves and help others. And this Prime Minister has understood the duty.

(END VIDEO CLIP)

HUME: For a long time the only place the president could go and make statements like that about current events was to London. First it was Blair, now Gordon Brown.

But the president had a friendlier hearing, it's fair to say, on this European tour. He only got specific promises of action on Iran, or at least a specific plan of action from Iran, from Britain. But the atmosphere, sort of under the radar in Europe towards this president and this country seems to have changed — Mort?

KONDRACKE: With the public, it hasn't changed. The Pew poll said very, very small percentages of Europeans still have confidence in George Bush's leadership, and they're all dying for Barack Obama to be president.

What has happened, I think, are two things. First, Bush has gotten much more friendly leadership in Europe than he used to have — Sarkozy in France and Angela Merkel, and Berlusconi. Gordon Brown is not any friendlier than Tony Blair, for sure, although he did do some interesting things yesterday.

What I think is also going on is that Bush has changed. I think Bush has mellowed as a foreign policy practitioner. He is now more in favor of doing something about global warming, and doing diplomacy vis-a-vis Iran instead of bombing, and diplomacy vis-a-vis North Korea, and so on. And they like that better.

LIASSON: Yes. Look, I also think that some of the big anti-Bush demonstrations, you don't see that as much on this trip. I also think it's not just that Bush is changing —

HUME: That's all those same people that elected these leaders with the pro-American view.

LIASSON: And they chose the center-right coalitions for these countries.

A lot of it is also that the unilateral approach that the United States took ran out of its string. The Bush administration has seen it is a better idea with the problems it's facing now to do multi-lateral diplomacy with Iran or North Korea, and it is just finding itself much more in sync with its European partners.

KRAUTHAMMER: I think it is wrong to say, as almost everybody does, that the Bush administration was overtly unilateralist. It prefers to be multi-lateral. Every time it could, as in the Korean issue or the Iran, it went with other countries.

The question was if you're faced with an issue where nobody will come along, do you therefore stop and not do it, or do you go ahead? And in Iraq we decided that we had to go and do it.

It is not that unilateralism is a choice. It is a question what do you do if allies will not follow?

HUME: Somebody once put it as a question of whether you let the coalition determine the mission or the mission should determine the coalition.

KRAUTHAMMER: Exactly. So there has not been a radical change. Iraq was the one issue on which others outside Britain had seen it differently, and we went alone essentially with them.

The Democrats have been saying since the Kerry campaign that the Bush administration has wrecked our alliances with Europe. It is complete nonsense. For the first time in at least half-a-century, the four main capitals in Europe, London, Paris, Rome, and Berlin, have pro-American governments. It is unprecedented.

They are helping us in Afghanistan, the first time NATO is acting militarily outside of Europe. And, as we're seeing slowly with European sanctions on Iran, they are finely accepting the proposition that the U.N. isn't going to do anything and Europe is going to have to act unilaterally.

It's not going to stop Iran, but it shows Europe coming around to the American perspective that Europe and America have to unilaterally use financial sanctions. And some of them are starting, and they'll continue.

HUME: And it does seem that Iran is vulnerable to financial sanctions as, perhaps, North Korea, for example, is not.

KONDRACKE: Well, it would be if Europe really put the screws to Iran, or if everybody got together and imposed a gasoline embargo, which they import gasoline in Iran, even though they produce oil.

That would make a difference. But nobody is willing to do that. The Germans aren't willing to go and really sock Iran with difficult sanctions. As you pointed out, only Britain is willing to not do business with them.

KRAUTHAMMER: But that is a failure not of American diplomacy. It is a failure of European will, which is an old story, and quite incurable.

HUME: Mara, do you agree with that?

LIASSON: Yes. Sanctions only work when they are really broadly unilateral, and when they are very tough. I don't think we're at that stage yet with Iran.

HUME: And so the question arises, will the next president have a Europe friendly to the United States or one that remains hostile. It would seem that what the president is leaving behind is a lot more positive.

KRAUTHAMMER: It is positive, and it will be dependent on conditions. But Obama is not going to light up the scene if he is president, and Bush has not darkened it.

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