This is a rush transcript of "Special Report With Brit Hume" from September 18, 2008. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

GEORGE BUSH, PRESIDENT OF THE UNITED STATES OF AMERICA: Financial markets continue to deal with serious challenges. As our recent actions demonstrate, my administration is focused on meeting these challenges.

(END VIDEO CLIP)

BRIT HUME, HOST: And by his administration, he means principally two people, that would be Federal Reserve Chairman Ben Bernanke, appointed by President Bush, and his Treasury Secretary Henry Paulson.

Indeed, Barney Frank, the Chairman of the Financial Services Committee and the House Representative said today about those two guys, quote, "What we have is over the horizon comes the Loner Ranger, that's Bernanke, and his faithful companion Paulson.

They're good guys, but that's not how it should be, that is unilaterally using their powers to help these struggling companies. That is why we're having hearings."

Well, the question arises how are the Lone Ranger and his faithful companion Paulson doing?

Questions and some thoughts on this now from Bill Sammon, Fox News Washington Deputy Managing Editor, Jeff Birnbaum, Managing Editor- Digital, of The Washington Times, and FOX News contributor and syndicated columnist Charles Krauthammer, also a FOX News contributor.

Jeff, you have been watching these financial matters for a long time, and you even once worked for The Wall Street Journal and Fortune magazine. So this is your territory. How are Bernanke and Paulson doing?

JEFF BIRNBAUM, COLMUNIST, THE WASHINGTON POST: I think they're running as fast as they can to stay ahead of a massive wave, and they're doing fairly well.

I think that, especially if they take another step, which is rumored, and we mentioned earlier in the show that there might be a special agency set up to take the billions of dollars of mortgage securities and other debts that cannot be valued.

That's the whole basis of this crisis. There are all sorts of debt instruments, securities of various kinds that are traded that nobody is willing to buy, because they don't know how much they're worth. Many of them —

HUME: They don't know how bad mortgage — how many bad mortgages may be attached to those packages of loans that they're buying.

BIRNBAUM: It's mortgages and other fancy financial instruments that are derived from mortgages.

HUME: Right.

BIRNBAUM: So no one know how much they are worth, really, or, another way to say it is no one knows how much they're really willing to pay for them because they don't know how much they're worth and how to profit from them.

HUME: So they can't be traded, really.

BIRNBAUM: They cannot be traded and have not been traded. In fact, the core here is that credit markets are completely seized up. The amount of money that normally flows from banks to investors and then to businesses has basically stopped.

That's why the federal government has been pouring tens of billions into the marketplace. They may take this additional step to finally collect some of these unsellable securities and try to sell them themselves.

HUME: But the fact that they're unsellable and unvaluable doesn't mean that they're worthless, does it?

BIRNBAUM: Oh, these are billions of dollars of securities that may be worth $100 billion or $50 billion. They're worth something, but no one knows exactly how much.

BILL SAMMON, FOX NEWS WASHINGTON DEPUTY MANAGING EDITOR: We will just have to wait for the market to come back and properties to start selling to see how much money you can get on the dollar for those properties.

But for the moment, since no one is buying and they are seized up, they are treated almost as worthless assets in some regard.

I think the fact that, as Jeff said, the administration is dumping tens of billions of cash into the credit markets to stimulate the credit markets so that it doesn't seize up answers your question about whether they are being proactive enough in the Bush administration.

As we speak, Paulson and Bernanke are on their way to Capitol Hill to meet with lawmakers of both parties, both houses of congress. President Bush has canceled a number of trips to hunker down.

He has gotten a lot of criticism because he hasn't come out and done a big speech or a big, high-profile press conference.

But you have to remember, this is the kind of crisis — this isn't like the Russian-Georgia crisis where you want to be out in front every day using the bully pulpit. This is the kind of crisis where you don't want to exacerbate it by exposing yourself to a bunch of reporters that are going to turn it into a feeding frenzy, and Bush says some gaffe that further de- stablizes the market.

So I think it is better to be discreet and prudent and carefully measured with your words.

HUME: Do you give them reasonably high marks?

SAMMON: I do.

HUME: What about you, Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: On the issue of these instruments, if there's something you can't sell, it may be worth a lot, but its price is zero as of today.

HUME: Right.

KRAUTAHMMER: And that's why all of this stuff is seizing up.

As for the Lone Ranger and Tonto, I think on a day in which the market widely swings up, you don't want to at attack them.

However, a criticism of them could be made that they have been acting without a principle or a rule or a logic. They come in, swoop in, and they save Bear Stearns. They then nationalize Fannie. They then let Lehman dissolve and disappear, saying, "The bank window is closed. We're not going to bail people out." Three days later AIG is nationalized.

Now, I could argue, and the markets will decide if all of this was wise and had to be done, but in a market in which the panic is ensuing because people have uncertainty as, for example, you mentioned on the value of these instruments, you would think that you don't want to add uncertainty.

And I think what Paulson and Bernanke have done has been reasonable. But it does introduce extra uncertainty in a situation in which it is already rampant.

I'm not sure that they had other alternatives, but, in the end, the judge of all this will be the market. If it survives, these guys are geniuses, and they are the David Petraeus of this campaign. Otherwise, they will be the William Caseys.

HUME: All right. What has all this economic uncertainty done to the presidential race? We'll talk about that next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: While Senator Obama and congressional leaders don't know what to think about the current crisis, we know what their plans are for the economy.

Today, Senator Obama's running mate said that raising taxes is patriotic.

CROWD: (BOOING)

MCCAIN: Raising taxes in a tough economy isn't patriotic. It's not a badge of honor. It's just plain dumb.

SEN. BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: With the magnitude of the crisis apparent even to the Bush White House, John McCain wants to reverse himself. He wants to reverse course.

Now, all of a sudden, he has become a populist. Now he's unleashed an angry tirade against all the insiders and lobbyists who happen to have supported him for the last 26 years, the same folks who are running his campaign right now.

(END VIDEO CLIP)

HUME: Well, McCain has come out with some proposals. One of them is to fire the head the Securities and Exchange Commission and one of his former Republican colleagues Chris Cox. The administration rejects that idea.

He has also come out with the idea of basically reconstituting the old resolution trust company which bought out the bad assets in the savings and loan mess some years ago, an idea that other have proposed as well.

He is also, as you heard, attacking Obama for the idea of raising taxes.

Obama, of course, as you heard, attacking him for the same old policies and same old people.

The polls suggest that this crisis has given Obama a distinct bounce. The debate is now unfolding. We have seen McCain, as Obama correctly said, trying to reconstitute himself a bit here. Who is coming out ahead here, Bill?

SAMMON: I think generally speaking bad news on the economy is good news politically for Barack Obama.

HUME: We understand that, that's the bounce. But what about how the two are responding to the crisis itself?

SAMMON: McCain is, as of today, trying to aggressively pivot to an attack on Obama on taxes, because if he can get beyond the discussion of how dire the economic meltdown is and say how will you deal with it, by lowering or raising taxes, you can perhaps position yourself a little bit better than he has been.

And he has been hurt in the last few days by this economic crisis.

HUME: Jeff, your thoughts on what he has proposed in addition to attacking Obama? It is more than Obama has proposed.

BIRNBAUM: Much more, and more on the point, I think. I think McCain stumbled badly for the last couple of days, at one point repeating his line about the fundamentals of the economy being strong. He shouldn't have said it on that day.

HUME: It may be true, but he shouldn't have said.

BIRNBAUM: Exactly. The idea of calling for a commission — not a good idea.

But he has recouped. I think this resolution trust agency idea is one that the administration may, in fact, accept. That is to put all of these securities in one place and try to sell them now that they can't be sold.

HUME: Or to buy them up.

BIRNBAUM: Buy them up-

HUME: Hold them and try to sell them later.

BIRNBAUM: And then try to sell them later.

HUME: But it essentially takes them off the market.

BIRNBAUM: Right. And that idea is what was responsible for the run up in the stock market at the end of today.

I think that McCain finally is getting it right. Attacking Wall Street, coming up with concrete proposals, and saying that a tax increase is the wrong idea against Obama.

It may be a little too late politically, but at least he has a proposal that I think fits the subject, something that Obama yet has not come up with.

HUME: Well, then it might not be too late, or might it, Charles?

And it's a remarkable move for McCain.

KRAUTAHMMER: Yes.

HUME: He's nothing if not trying to be agile.

KRAUTAHMMER: I think the word I would use to describe it is "audacity," and it really is.

But, look, I think what he has said has additionally hurt him. I think it had an effect, and now I think he is regaining his ground.

But I'm not sure that anybody is believing in the proposals of either candidate. They are both now wildly populist on this, and I think ordinary folks have a sense, as I do, that neither of them has the slightest idea what to do.

As Harry Reid has said —

HUME: Harry Reid said he doesn't know what to do, and he said nobody knows what to do.

KRAUTAHMMER: Outside of the Lone Ranger and Tonto, I'm not sure a lot of people do.

I think what is really happening here and the reason Obama is recovering is because the crisis trumps and negates celebrity. The bump McCain had was entirely a Palin effect. It was a "Sarah surge." And at the time, three weeks ago, the economy is calm, Iraq is basically not an issue, and she seized the public imagination.

In a crisis, if you're worrying about your retirement and money market account, celebrity and charisma disappears. And that's why her bounce has disappeared.

BIRNBAUM: I think that's where McCain can get back momentum. Experience will be very important here.

The problem is that I'm not sure he's credible as having experience on the economy. But experience in Washington helps when there's so much of a crisis that it's facing.

HUME: That's it for the panel.

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