This is a rush transcript from "The Beltway Boys", September 20, 2008, that has been edited for clarity.

FRED BARNES, CO-HOST: Coming up on "The Beltway Boys," the federal government takes over financial institutions and who knows why else.

MORT KONDRACKE, CO-HOST: We'll tell you how each candidate is jockeying for position on the economic mess and who's got the upper hand.

BARNES: It's been a month since Sarah Palin burst onto the scene. We'll tell you if there is still air in the Palin bounce.

KONDRACKE: And the Clinton's say that they're doing all they can to help the Obama campaign. But are they really? There's been some grumbling.

BARNES: All that's coming up on The Beltway Boys right now.

I am Frank Barnes.

KONDRACKE: And I am Mort Kondracke, and we're "The Beltway Boys."

Well, the hot story of the week is to the rescue. We are not talking about lip stick on a pig any more. We're not talking about Sarah Palin because of the panic that emanated from Wall Street and the rescue operation put in effect by Hank Paulson and Ben Bernanke, which I have to say is very — it is unprecedented. It's massive. It is not a free market operation that they pulled off.

All this has forced the presidential candidates to get serious and talk about the economic mess that the country is in. What do they do in the first instance? They pointed the finger at each other. Watch.

(BEGIN VIDEO CLIP)

AD NARRATOR: When our economy is in crisis, a big government casts a big shadow on us all. Obama and his liberal congressional allies want a massive government, billions in spending increases, wasteful pork. And we would pay painful income taxes, sky rocketing taxes on life savings, electricity and home heating oil. Can your family afford that?

SEN. JOHN MCCAIN, (R), PRESIDENTIAL CANDIDATE: Our economy, I think, still, the fundamentals of our economy are strong.

The fundamentals of our economy are strong.

(BEGIN VIDEO CLIP)

KONDRACKE: I would just observe that the rescue package that got put together is what you might call massive government, unlike what McCain was criticizing. It is going to cost billions and billions of dollars, hundreds of billions was dollars. It is a major intervention of the government in the private economy. I would say it's a liberal program. But it was absolutely necessary because there was, as I said, a panic emanating from Wall Street and locking up credit and a terrible fear of lending. And it was likely to cascade onto Main Street and effect the entire economy.

Both candidates actually were behind the curb in the beginning, although they are catching up and are coming up with proposals. Although they are still concentrating on beating up on each other.

BARNES: What you call an economic mess, it is a mess in financial markets. It's not in the economy is growing. The economy is growing. Inflation is low.

(CROSSTALK)

KONDRACKE: ... are good, right?

BARNES: They absolutely are. What do you think is bad? Inflation or interest rate? Is it the economy?

KONDRACKE: How about the federal debt? How about the federal debt? How about...

BARNES: That was there anyway, Mort. Please. Please.

KONDRACKE: Well, it's going to up by a trillion dollars.

BARNES: Look, this plan can't be liberal because I'm for it. I think it's a good idea. There's really — There is no alternative and that's why they did it.

For the record, I don't have this condescending view of a discussion of lip stick on a pig, something that Barack Obama said, all the charges against Sarah Palin. I think they are illuminating.

And, in fact, Mort, have you noticed that Republicans...

KONDRACKE: Do you there are central issues to the campaign?

BARNES: I think they tell you a lot about one particular candidate.

Mort, have you noticed that the Republican brand as improved dramatically and have you noticed that voters, independent voters regard Republicans as favorably as Democrats, that the Republican Party I.D., that favorably has risen dramatically?

KONDRACKE: I think it says more about the Democrats than it does about the Republicans.

BARNES: It says a lot about Sarah Palin because she's helped the Democratic brand. So has John McCain actually. The Palin bounce I think - - Republicans have gotten a lot out of it. Maybe not more but there've gotten a lot. It exists.

Now, the reason I think that the plan is a good idea — and if it works, for sure, Hank Paulson will go down as one of the great treasury secretaries — there was no alternatives. You didn't want financial market problems to seep into the economy. Then you would have an economic mess. But they stopped it from happening and more power to them. I think it probably will work.

You said it will cost hundreds of billions and I doubt it. Did you notice the terms of the agreement when they took over AIG, the big insurance company? They were great terms for the government. AIG hated them. and they acquired the biggest insurance company in the world. One that is a huge asset. They own that. When they buy up all of these mortgage-backed securities, they buy them at a cut rate. They'll make 30 percent or sell them for more later.

Remember when the savings and loans and all of those foreclosures were bought back in the 80s? They sold them for more money. So I don't think they'll lose hundreds of billions of dollars. Who knows? We don't how this thing is going to work. I think well, but I don't really know.

Now, when you get to Obama and McCain, I don't think they had a clue about what going on in financial market. You can tell from this. Watch.

(BEGIN VIDEO CLIP)

OBAMA: We cannot only have a plan for Wall Street. we must also help main street. I am glad that our government is moving so quickly to address the crisis that threaten our big banks and corporations. But a similar crisis has threatened workers and homeowners for months and months. And Washington has done far too little to help.

MCCAIN: As the financial crisis continues, and bail outs and bankruptcies mount, it is clear financial firms have lost the trust of the American people. That trust can't be regained unless we adopt some fundamental reforms. Government has a clear responsibility to act and to defend the public interest. That's exactly what I intend to do.

(END VIDEO CLIP)

BARNES: Wait a minute. Wait a minute. He won't need to, it just happened.

Look, I give McCain, for all of the dumb things he said, he did propose a plan like the one adopted by Paulson. And Paulson wasn't looking to McCain for advice. He was already thinking about that. McCain stumbled into that one. I don't fault Obama for saying very little, for being tentative. The truth is their help was not needed.

KONDRACKE: And you are definitely right about Hank Paulson. You know, what I thought for a long time is if George Bush had had the cabinet in the first term that he's had in his success term, that his popularity rating would not have been in the 30s and he wouldn't have gotten himself in a lot of the trouble he got himself. I think the credit for that goes to Josh Bolten, second term chief of staff.

But the polls, as exist right now, indicate that Obama is benefiting from the economic crisis. They were tied on the economy a couple of weeks ago and now 60 percent in the latest CBS-"New York Times" poll said they are very or some what confident in Obama's ability to handle the economy. And 53 percent said that about McCain.

Look, economics helps the party that is out of power. Whether you agree with it or not, this is a big government thing that's happened and the Democrats are the party of the government. Republicans aren't.

In fact, I think if Bill Clinton was president, and Bob Ruben had done this, you and your Republican friends would have been screaming bloody murder about the intervention into the economy.

BARNES: Me and my ilk?

KONDRACKE: Yes. Obama's advantage may wear out if this doesn't cascade to Main Street. Let's hope it doesn't. But if it does cascade and the economic growth rate goes down, it will help Obama.

BARNES: The whole idea here is to avert a recession. That's what the bail out is about so it doesn't bleed in the real economy. A recession hasn't happened yet. So don't get your hopes up, Mort.

Obama still has a problem with the economy. I'm not saying the economy is booming. It is weak. What is Obama's solution? Raise taxes and have more protectionism. What is the strongest force, the strongest fundamental in our economy right now? A huge export boom. You start with more protectionism and you will stifle that.

KONDRACKE: One, he said that he may not raise taxes on rich people if the economy looks weak. And...

BARNES: Admitting that raising taxes hurts the economy.

KONDRACKE: In a bad economy, yes, it certainly does.

BARNES: It hurts the economy anytime.

KONDRACKE: Well, you have to pay your bills.

Coming up, the stars cough up serious cash for Barack Obama. And are Bill and Hillary Clinton doing all they can to help Obama or just paying lip service?

(COMMERCIAL BREAK)

KONDRACKE: Welcome back to "The Beltway Boys." Time for the "Ups and Downs."

Down, the Clintons. While Bill is stumping for Obama in Florida on Monday and Hillary Clinton has been making some rounds in battle ground states, there is grumbling they are doing just the bare minimum to help Obama.

BARNES: Where are we getting those wonderful Clintons? The down arrow. Did you see what Bill Clinton said on CNBC this week? In an interview, he called McCain a great man and said this about Sarah Palin, quote — listen to this — "She is instinctively effective candidate with a compelling story. I think it is exciting to some" — including him — "that she is a woman."

I get why she has done so well. It is a mistake to underestimate. she's got good intuitive skills. They're significant.

Look, the Clintons — that was very astute though, didn't you think.

KONDRACKE: He's in love too?

BARNES: I know. That is significant. There is several readings on that. The Clintons aren't any way obligated to go to bat all fall for him.

KONDRACKE: They're not?

BARNES: No, no. not morally, politically any reason to do that. I think it would be unprecedented if they did that. If it was so important for Obama to have the Clintons to be backing him, he just needed to do one thing, name Hillary Clinton as running mate. Simple as that.

KONDRACKE: Well, there is something called team playing and the better team player you are, generally speaking, the more rewarded you are. Although it doesn't always work, as we know from the Ronald Reagan example with Gerald Ford.

Bill Clinton, in that CNBC interview, said not one thing about any virtue of Obama's personality or his policies. He did say that he felt that Obama would win because the country wants change. That's a lot.

BARNES: You don't like that kind of candor?

Up, Hollywood money. Barbra Streisand sings and Obama coffers go cha'ching. The star-studded fundraiser this week racked in $9 million for Obama, as if he needed the money, and the DNC. Stars such as Jody Foster and Leonardo DiCaprio and Jamie Lee Curtis coughed up over $28,000 apiece for dinner for Obama and the Streisand concert.

McCain said it proves Obama is out of the touch. Watch

(BEGIN VIDEO CLIP)

MCCAIN: Talk about siding with the people. Siding with the people before he flew off it Hollywood for a fundraiser with Barbra Streisand and his celebrity friends. Let me tell you, my friends, there is no place I would rather be than here with the working men and women in Ohio.

(END VIDEO CLIP)

KONDRACKE: You know where McCain was on August 26th? He was not with the working men and women. He was in Beverly Hills with the likes of David Zucker, James Caan, Robert Duvall and Jerry Bruckheimer. All guys, by the way. That was pre-Sarah Palin, I guess.

BARNES: What is your point about this? Politicians go to Hollywood to rake in money? Some...

KONDRACKE: Even Republicans? Even John McCain?

Don't you think it is a little hypocritical for McCain to go after Obama for going to Hollywood after he had been to Hollywood?

BARNES: I'd say maybe a lot hypocritical, but so what. Democrats can raise more money than Republicans. That's why the Republicans complain some. Then, as a result, they have to listen to Matt Damon pontificate about the presidency. And they have to hear Barbra Streisand's tactical advice about wining elections. They deserve money for suffering through that.

Coming up, House Democrats cave on off shore oil drilling, or did they? Top Democrat Charley Rangel said he is not going anywhere despite the ethic's probe. We'll have the fallout next.

(COMMERCIAL BREAK)

BARNES: Welcome back. We're continuing with our "Ups and Downs."

Down, New York Democratic Charley Rangel. The Ways and Means chairman says he will not resign or give up his chairmanship in the wake of an ethic investigation. Among other things, Rangel is accused of not paying taxes on a $75,000 in rental income on a vacation property. And it's putting Democrats in a tough spot heading into the elections. Watch.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER, (R), OHIO: I think the charges are serious for the chief tax writer in the United States Congress to not file his taxes correctly and not file his financial disclosure correctly — I think would upset most Americans.

REP. NANCY PELOSI, (D), SPEAKER OF THE HOUSE: I see why no reason why Mr. Rangel should step down. Mr. Rangel has called for the Ethics Committee to look into his disclosures, et cetera. And I have long supported, over the last few weeks, since this issue came up.

(END VIDEO CLIP)

KONDRACKE: There is no question this is a huge embarrassment for Charley Rangel and House Democrats. And Charley Rangel is in a lot of different kinds of trouble. Most of it is not indictable, I don't think. We'll see. We'll see. We'll see.

BARNES: But he evaded — Mort...

KONDRACKE: Well, if it is found that he evaded taxes and he gets charged for it, then he will have to step down. The rules are — the House Democratic rules are that you don't have to leave your chairmanship unless you are indicted or censured by the House. In the case of Bill Jefferson, he was raided by the FBI.

Republicans have been calling for Charley Rangel's head, but it is worth observing that two of their chairmen, Jerry Lewis, of the Appropriations Committee, when he was chairman, and Don Young, of the Natural Resources Committee, were under federal investigation and they didn't have to step down. So the Republicans are applying the rules to Charley Rangel that they didn't observe themselves.

BARNES: You're saying that because Republicans didn't do what they should have done that Democrats shouldn't do with Rangel what they should be doing. Is that your line of argument?

KONDRACKE: There is no reason that he should be stepping down at this point.

BARNES: No, no, no, you're wrong about that. Boehner had a good point. It is not that he is the chairman of any committee. They are looking into it to see if he evaded taxes. What does the Ways and Means Committee do? This is the tax committee and tax writing committee. This is what they do, more than anything else. I think there is — just because John Boehner points it out, Mort, doesn't mean it is wrong.

I didn't know you were such a defender of the House rules. Everybody outside the beltway hates the rules.

KONDRACKE: The rules are the rules. And you obey the rules, you know. And it is an embarrassment. It is a political embarrassment. No doubt about it.

BARNES: It's more than that.

KONDRACKE: Down. Democrats pushed through an energy bill with off shore drilling in it, but not in the areas where the large majority of the oil is believed to be. That is, within 50 miles off shore.

Here are the highlights of the bill. Congress' approval ratings — the Democratic Congress' approval ratings are either, in highs, single digits, or low, double digits, 10, 11, nine. That is abominable. This is why. The country wants energy independence and lower gas prices. The Democrats get bludgeoned into producing a bill that contains off shore drilling, but they design it only to give themselves political cover and not it produce oil and not to pass. It will not pass the senate and the result of this is the problem will not get solved.

BARNES: I thought you would appreciate how clever this was however by Nancy Pelosi. I mean, usually if you have a bill, it's the opponents who put the poison pills in it so the bill will die.

This time, Nancy Pelosi introduces the bill, but she puts — her bill, a Democratic bill. She puts her own poison pills in so she knows it will not go anywhere. That is — that's awfully cleaver, Mort.

Up, the gun lobby. The NRA flexed its muscles on a House-passed bill that strips much of the gun control measures the District of Columbia government enacted after the Supreme Court overturned the D.C. handgun ban. The vote was 266 to 152 including 85 Democrats.

Look, Democrats don't want to get caught on the gun control issue again. It hurt them in the past. It hurt Al Gore when he ran for president. And look, doesn't the D.C. learn? Didn't they read the court decision? Now they're trying to sneak around it. Come on.

KONDRACKE: This thing is...

BARNES: People in the district out to be able to have a gun.

KONDRACKE: Look, D.C. ought to be allowed to pass their own laws and if they don't pass muster with the courts, they can get thrown out by the courts. Congress ought to let D.C. manage its own affairs.

BARNES: Do you have a gun in the house.

KONDRACKE: No.

BARNES: All right, hand onto your hats, "The buzz" is coming up next.

(COMMERCIAL BREAK)

BARNES: What's "The Buzz," Mort?

KONDRACKE: Anybody who wants to know how the financial crises developed, why it is not over, has to read a book by Dave Smick, called "The World is Curved." What he is arguing is that this is a global credit crisis and it has got to be solved by having an international summit of the major industrialized countries to make sure that the credit markets, the credit flows stay open, which Davis calls the bloodline of the entire world economy.

The person who has picked up on this, the candidate who has picked up on it is Barack Obama.

BARNES: Very smart. It is a great book. McCain would benefit from reading it. I certainly did.

I have known Dave for a long time. His book points out, of course, the global system now that we have really rewards entrepreneurs and it generated great wealth and lifted millions of people out of the poverty. But it's very fragile.

KONDRACKE: Right, no question about that.

BARNES: And that's all for "The Beltway Boys" for this week. Join us next week when the boys will be back in town.

Watch "The Beltway Boys" Saturday at 6 p.m. ET and Sunday at 1 and 6 a.m. ET

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