This is a rush transcript from "Hannity & Colmes," September 30, 2008. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: We can't afford not to act so both parties who are close over the next few hours and the next few days should seek out any new ideas that might get this done. That might make the proposal better. For example, this morning I proposed one such idea that might increase bipartisan support for the plan and shore up our economy, and that's expand federal deposit insurance for families and small businesses across America who have invested their money in our banks.

(END VIDEO CLIP)

SEAN HANNITY, CO-HOST: That was Senator Obama earlier today pushing both parties to get back to the negotiating party. Obama has been accused by critics of playing the middle with the bailout package. Meanwhile, Senator McCain used the words of former President Bill Clinton in a new ad for his most recent criticism of the left. Take a look.

(BEGIN VIDEO CLIP)

ANNOUNCER: The Post says McCain pushed for stronger regulation. While Mr. Obama was notably silent. But Democrats blocked the reforms. Bill Clinton knows who is responsible.

BILL CLINTON, HILLARY'S HUSBAND: I think the responsibility that the Democrats have may rest more in resisting any efforts by Republicans and the Congress or by me when I was president to put some standards and tighten up a little on Fannie Mae and Freddie Mac.

(END VIDEO CLIP)

Video: Watch Sean and Alan's interview

HANNITY: Joining us now is former Iowa Governor Tom Vilsack. Governor, let me put up on the screen. This was, when John McCain was a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, this is what he said. "I join as a consponsor of this bill to underscore my support for a quick passage of GSE regulatory reform regulation. If Congress does not act," he said, "American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole."

Democrats blocked that bill. Democrats, as we just saw in the last segment — Democrats said everything was fine. Does Barack Obama and his friends Jim Johnson and Franklin Raines — do they deserve any of the blame?

TOM VILSACK, FORMER IOWA GOVERNOR: In is a very large problem, and I frankly think we need to move off the blame game and try to find a solution to this.

HANNITY: I didn't ask that. I'm asking, they blocked the reform. John McCain called for specific reform or financial institutions would collapse, the economy would suffer, and the American taxpayer will be on the hook. Was John McCain right?

VILSACK: John McCain also was taking credit for the deal that never happened.

HANNITY: Was John McCain right in 2005?

VILSACK: I think it's important to say that John McCain didn't deliver the Republican votes when...

HANNITY: This is pathetic. Was he right in 2005, what I just put up there?

VILSACK: I haven't had a chance to read the entire quote, but he may have been right. It's not just about Freddie and Fannie. It's about the nature of investment strategies, it was a lack of transparency and a lack accountability. There's a series of steps here, Sean. It's not just one thing.

HANNITY: Here we have economic advisors for Barack Obama. We've got Franklin Raines. He made $90 million from Fannie Mae for the six years that he worked there. An economic adviser...

VILSACK: He's not connected with the campaign.

HANNITY: Oh, yes, he is. Don't believe me. Read The Washington Post. Franklin Raines — and then Jim Johnson was selected — he also ran Fannie Mae, was a CEO at Lehman Brothers. He made tens of millions dollars, and they're both reported to be mortgage and economic advisers for the Obama campaign. Should they be taken off the campaign?

VILSACK: They are not part of the campaign.

HANNITY: Jim Johnson was selected to head up his VP committee.

VILSACK: They are not...

HANNITY: You're not telling the truth.

VILSACK: I am. They are not part of the campaign and you know it.

HANNITY: Governor, he was selected to pick his VP.

ALAN COLMES, CO-HOST: And apparently did a much better job picking a VP than John McCain's people did apparently. I think we're seeing that to be true. Also if we're going to play that game, governor, I want to give you a chance to explain in a second, Rick Davis, McCain's confidant, his adviser Charlie Black worked for Freddie Mac, Rick Davis got $15,000 a month up until last month, we can talk about the 19 McCain fundraisers and advisers who lobbied for Freddie and Fannie. This is about a private bank issue right now, the private banks are collapsing.

What do we do?

VILSACK: There's no question about that, Alan.

And that's why we need a resolution to steady this economy and make sure that homeowners are protected, taxpayers are taken care of, that CEOs are checked, and that Secretary Paulson doesn't have a blank check. Those are the principals that Senator Obama has laid out, makes sense to me. And we should get back to work and get it done.

COLMES: You know, we're hearing a lot of blame, Sean mentioned it, other conservatives have mentioned it, the Community Reinvestment Act, which was signed into law in 1977, actually the reins loosened on that in 2004 by George W. Bush, this current president that weakened the regulations, pulling mid and small sized banks outside the ruling of that law, that's what led to this to some extent. Not what happened in 1977.

VILSACK: I think it's a combination of things. Bottom line, we know what went wrong. The question is what is going to correct the situation, and can we get Democrats and Republicans to work together? Republicans didn't deliver the votes they said they were going to deliver. That's one of the reasons it .

HANNITY: Ninety-five Democrats voted against it. Ninety-five, governor.

VILSACK: A hundred forty Democrats voted for it. They only had to deliver 120. Republicans were supposed to deliver a hundred. They only delivered 65, Sean.

COLMES: A majority of Republicans did not vote for this. Would you agree with extending unemployment insurance, letting bankruptcy judges adjust mortgages, restricting executive compensation, aren't these some of the things that we need to put into this legislation?

VILSACK: I would say that Senator Obama has put forward the principles that ought to be in this legislation, and I would say, Alan, if there are other steps that need to bring taken, next year we've got another Congress coming.

COLMES: And another president, for sure. Thank you, governor very much for being with us tonight.

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