This is a rush transcript from "The Beltway Boys", October 4, 2008, that has been edited for clarity.

FRED BARNES, FOX CO-HOST: Coming up on "The Beltway Boys," Sarah Palin holds her own at this week's VP debate. We'll tell you if it did anything to change the direction of the race.

MORT KONDRACKE, FOX CO-HOST: Congress passes a financial rescue package. Does that mean we're out of the woods?

BARNES: Bill Clinton finally makes good on his promise to campaign for Barack Obama. We'll tell you how he did.

KONDRACKE: And is the Commission on Presidential Debates really fair and balanced?

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

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN, (R), VICE PRESIDENTIAL CANDIDATE: So, Joe, there you go again pointing backwards again. You prefaced your whole comment with the Bush administration. Now doggone it, let's look ahead and tell Americans what we have to plan to do for them in the future.

JOE BIDEN, (D), VICE PRESIDENTIAL CANDIDATE: Look, past is prologue. The issue is how different is John McCain's policy going to be than George Bush's? I haven't heard anything yet.

(END VIDEO CLIP)

BARNES: I'm Fred Barnes.

KONDRACKE: And I'm Mort Kondracke. We're "The Beltway Boys."

BARNES: Hot story number one tonight, Mort, is Palin power.

Mort, I've seen every presidential debate and vice presidential debate since 1976, as you have. It makes me tired to think about it. But in any case, I think Sarah Palin's performance in the debate with Joe Biden was one of the three or four best I've ever seen for one particular reason. And the reason is she utterly changed her image.

based on these two TV interviews she's given a week or two ago, her image was somebody, you know, didn't know enough, not capable of being a — playing it at the top level of national politics. She completely undid that, reversed that in 90 minutes. That's why I was so impressed.

I think she proved to be every bit a match on substance to Joe Biden. She certainly stayed with him on that and made fewer errors than he did.

The other thing was she conveyed her personality so well. She has a star quality and charisma that Biden doesn't have. Some politicians have it and some don't. She really exuded it. She was friendly, in a good mood. She identified her family with middle American families. And I think gave people a comfort level with her that they certainly hadn't had before.

Anyway, watch this.

(BEGIN VIDEO CLIP)

PALIN: Oh, man, it's so obvious I'm a Washington outsider and someone not used to the way you guys operate. Here you voted for the war. Now you oppose the war. Americans are craving that straight talk and just want to know, hey, if you voted for it, tell us why you voted for us and it was a war resolution.

(END VIDEO CLIP)

BARNES: Even that's straight talk.

KONDRACKE: Fred, you were in love before this debate and obviously you still are.

Look, I think that she definitely neutralized the Sarah Palin as an air head issue, which largely arose from the Katie Couric interviews where she did seem to be an air head. And John McCain was suffering from it because he picked her after all. So now the whole scene goes back where it belongs to Barack Obama versus John McCain.

And here's Joe Biden talking about that. Watch.

(BEGIN VIDEO CLIP)

SEN. JOE BIDEN, (D), PRESIDENTIAL CANDIDATE: He's been a maverick on some issues, but he has been no maverick on the things that matter to people's lives. He voted for George Bush's budget which put us a half trillion dollars in debt this year and over $3 trillion in debt since he got there. He's not been a maverick for providing health care for people.

(END VIDEO CLIP)

BARNES: Neutralized her as a ditz, huh.

KONDRACKE: That's air head.

BARNES: Air head?

KONDRACKE: I think it removes the vice presidential issue from the scene. people aren't going to be talking about that, except maybe Republicans.

BARNES: It was an extraordinary performance under terrific pressure that was on her.

Anyway, let's ask this about Thursday night's debate. Was it a so- called game changer. And Mort and I have our own litmus test. Here it is. Number one, did either candidate energize the base?

I think Sarah Palin energized the conservative Republican base, no question about that, probably the same way when she was picked in the first place. Biden didn't have to energize the Democrat debates. It's been energized for months.

KONDRACKE: The Republicans were in the doldrums going into the debate partly because John McCain's been losing traction and Sarah Palin is losing luster. Lots of polls showed that Biden had moved ahead in, who do you trust to be president of the united states. Certainly, among Republicans, she pulled back from that and probably they're happy again. Biden didn't have to do much. Certainly, didn't excite anybody very much.

BARNES: Not even you?

KONDRACKE: But — but, but, he did not make any mistakes. The game goes on.

BARNES: We'll get to that. He made egregious mistakes. We'll get to them right now. This is number two of our litmus test. Did the candidate pass the presidential test?

KONDRACKE: I ask you if, God forbid, John McCain gets another recurrence of melanoma and leaves the scene within the first year of the McCain administration, are you satisfied Sarah Palin could become president of the United States?

BARNES: I certainly am satisfied with — have as much confidence in her — look, she has more experience than Barack Obama, that's for sure.

KONDRACKE: Well, I'm not.

BARNES: The answer's yes.

KONDRACKE: I certainly am not. And I think a lot of Americans are not. Look, they ought not be because she's governor of Alaska. but you got to have national and international policy in your fingertips to be president of the united states. You've got to have lots of the experience and she clearly doesn't have it. You know, maybe after two or three years of helping to make policy, she's clearly got a high I.Q. And she could learn but she ain't ready yet.

BARNES: Mort, if she made the mistakes Joe Biden did, a fraction of them, in that debate, we'd be saying maybe she should drop off the ticket.

Let me point out, you have this utter confidence in Biden. Biden said the U.S. and France had driven Hezbollah out of Lebanon.

KONDRACKE: Wrong.

BARNES: That's egregiously wrong. He didn't understand what the Constitution says about what the vice president's duties are. He got that one. You would think he would know. He got the article wrong and the role — whether the vice president presides only in a tie vote or just presides period. You've been in the senate 36 years, you think he would know better than that.

Iraq, he said we spend more in a month in Iraq than we've spent in Afghanistan for the last, what, umpteen years. He was wrong by 2,000 percent. Now, those are major errors. If you have doubts about — if you feel comfortable about Biden, he could step in if something happened?

KONDRACKE: I actually do. You are absolutely right that if Palin had made those mistakes they would be screaming for her head.

BARNES: You're absolutely right.

KONDRACKE: That is because Biden has a reservoir of 26 years or whatever it is...

BARNES: Thirty-six.

KONDRACKE: Thirty-six years serving. And those are errors of fact which she could look up. They're judged by different standards.

BARNES: I know they are. It's called a double standard. So longevity matters.

Number three, and perhaps the most important test, did the debate change the direction of the campaign? I have to say not yet. Maybe it gives a really — juts Sarah Palin into the forefront. It might happen and might not.

KONDRACKE: I agree. The direction of the campaign is entirely in Barack Obama's direction at the moment.

BARNES: Right.

KONDRACKE: One, you've got the McCain campaign pulling out of Michigan, although Sarah Palin is volunteering that she and her husband to go there and try to save the day.

BARNES: She's a maverick, Sarah Palin.

KONDRACKE: Yes. And Obama is leading by about 6 points in the Real Clear Politics average of various holes. And Real Clear Politics tracts the polls in key battleground cities and they show Obama picking up support in Colorado, Ohio, Florida, Pennsylvania and Virginia. If Obama carries those states he's going to win.

BARNES: He'd — he has a better chance of winning those if Sarah Palin had not done a terrific job in that debate for sure. Wouldn't you say?

KONDRACKE: Well, as I say, she neutralized — he has a better chance.

BARNES: Mort, there's a word for what you're saying about Sarah Palin, grudging.

Coming up, it took a lot of twisting but Congress pushes through a financial rescue bill. Will it work? Hot story number two, straight ahead.

(COMMERCIAL BREAK)

(FOX NEWS BREAK)

KONDRACKE: Welcome back to "The Beltway Boys." Hot story number two, brink of doom.

Congress looked into the precipice of economic catastrophe — that's what we could have expected to happen had they not passed the rescue package. The House picked up 58 votes from the defeat of the rescue package on Monday to pass it on Friday and, you know, rescued the rescue package.

One of the heroes of this is a friend of yours, Paul Ryan, a conservative Republican from Wisconsin, who said on Monday when the bill went down, that this was a Herbert Hoover moment, referring to the Great Depression. On Friday, in a speech on the House floor he said, look, we're going to have a recession but this is the difference between a deep and long recession and hopefully a short and shallow one. So — and I think that's where things stand. You know, it's going to depend how Hank Paulson administers this thing whether it works and whether there's enough in this bill — I think there should be, but who knows. It's basically a theory.

So here is — here are John Boehner, the Republican leader of the House, and Steny Hoyer, the House majority leader, talking about the rescue package. Watch

(BEGIN VIDEO CLIP)

JOHN BOEHNER, (R), HOUSE MINORITY LEADER: I told them whether you vote yes or no, you've got to go home and defend this. It's a lot easier to defend your vote if you and — in your own mind will just do the right thing.

STENY HOYER, (D), HOUSE MAJORITY LEADER: Failure was not an option. The American public expected us to act and respond and insure, to the extent we could, that we stop the downward spiral of our economy.

(END VIDEO CLIP)

BARNES: Look, I'm not totally convinced this particular $700 billion bailout or rescue or stabilization package — one thing is using the word bailout from the beginning.

KONDRACKE: Absolutely. Right.

BARNES: Rescue, I think that's wise. In any case, I'm not convinced this was the best possible plan for stopping financial markets from falling into a complete catastrophe.

But there are two reasons why we had to go with this. One, there is a crisis. There's a crisis in financial markets. It could spread to the economy — in fact, it already has to credit markets. We're going to have a lot less credit allocation in this country, which will slow economic growth probably for a number of years. So that's one reason, there is a crisis that demands urgent action.

And the second reason is that this is the only thing that can get through Congress. We're dealing with a political situation. Republicans might have preferred something else but it wasn't getting through a Democratic Congress. You had to compromise. In the end, I think this is the right thing.

KONDRACKE: Clearly, it's the right thing. I think there was Republican input into this thing. The big mistake that everybody made in the first instance is that the Republican leadership did not realize that the rank and file were not going to follow. So Ryan actually was the one, along with Eric Canter, who invented Republican input into the bill, and then Roy Blunt, the Republican whip, was in the meetings with the Democrats. Barney Frank is a hero in this working with Paulson in it. They put together the package that was defeated on Monday, but then the senate, obviously, passed what it passed and attached it on to the House bill and it finally passed because the market lost a trillion dollars in value on Monday after the House did what it did.

BARNES: Just think. I can't predict exactly what the market would do. Just think if this thing had gone down to defeat or if it had to be taken off the table because there weren't enough votes for it.

KONDRACKE: It would have been a catastrophe.

Coming up, the Commission on Presidential Debates gets a black eye. And Bill Clinton hits the stump for Obama and for the financial rescue bill. We'll tell you how he did on both issues next.

(COMMERCIAL BREAK)

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

Down, the Commission on Presidential Debate. It has gotten heat over its decision to keep Gwen Ifill as the moderator of Thursday's vice presidential debate despite the fact she's writing a book about Barack Obama.

The truth is Gwen did fine. I'll give her an "A." It turned out not to be a problem but I don't think she should have been picked in the first place, given her connection to Barack Obama.

But the fact that an unelected self-appointed, self-perpetuating commission of three people is in charge of where the debates are going to be held, when they're going to be on and who the questioners are going to be is appalling to me.

Mort, remember there was a better day.

(LAUGHTER)

BARNES: Years ago. I could go back to 1984. You and I were in the debates.

KONDRACKE: Look at that! Who is that guy?

BARNES: Looks like a teenager. That guy, that's a pretty serious guy. He's asking a serious question. Look at that.

Anyways, that's when the campaigns, of course, played a role and they could veto people or accept people. You and I made it in the 1984 debates.

But I think we need to work out a new process and let the campaigns get involved. and do we have to have the debates at the colleges picked out. They pay for the right to have a debate in their place. Besides, these ought to be in battleground states for one thing.

KONDRACKE: Do you want the government to do it?

BARNES: No, the campaigns can do it. We had the league of women voters before. They flamed out. But the campaigns...

KONDRACKE: So always in Ohio, always in Florida, always in Pennsylvania? OK.

BARNES: Yes.

KONDRACKE: Gwen Ifill got a lot of trouble from conservative media alleging she could not be even-headed. She was very even-headed. Watch this.

(END VIDEO CLIP)

GWEN IFILL, DEBATE MODERATOR: You have proposed raising taxes on people who earn over $250,000 a year. The question for you is why is that not class warfare?

The same question for you, Governor Palin, you have proposed health benefits which some study say throw five million more people into the rolls of the uninsured. I want to know why that isn't taking things out on the poor.

KONDRACKE: Straight down the middle.

BARNES: Fair and balanced.

KONDRACKE: Right.

Up, Bill Clinton. He made good on his promise to campaign for Barack Obama, which he did on Wednesday in Florida. In my opinion he was — he proved to be a stronger voice on the federal rescue package than even president Bush. Watch this.

(BEGIN VIDEO CLIP)

BILL CLINTON, (D), FORMER PRESIDENT OF THE UNITED STATES: It has nothing to do with bailing out wall street. The wall street you're mad at doesn't exist anymore. Banks aren't like these risky investment firms. They have to have 10 percent capital for all the loans they put out. The more they reduce their capital, the less they can loan. If we don't do something about this, it won't be long before you can't go down and buy a refrigerator on an installment plan.

(END VIDEO CLIP)

KONDRACKE: That was great. That was great.

BARNES: He's right.

KONDRACKE: And he also — that speech was a performance on behalf of Barack Obama. If I were Barack Obama, I would take him up on his offer to campaign whenever asked and ask him to campaign a lot.

BARNES: I don't think the Clintons' are obligated in any way to campaign for Obama. He whipped them. They're the losers. They don't have to do that. As you said, the race is about McCain and Obama.

Beside, I think the important thing that Obama has to do is convince the Clintons to actually vote for them, which I think in the secrecy of the polling booth, I think I know who they're going to vote for, and it's not Barack Obama. Anyway, up, New York City Mayor Michael Bloomberg, one of Mort's favorites. He's abandoning one of — his earlier opposition to changing the term-limits law and he's seeking a third term as mayor, and likely not having too much opposition.

Mort, I know you hate term limits anyway.

KONDRACKE: I'm sad about this decision. As a matter of fact, I was hoping Michael Bloomberg would emerge as treasury secretary in whoever's administration won, either an Obama administration or a McCain administration. He's, you know, he's a financial genius. He made gazillions of dollars. And he knows what markets are all about. And he obviously cares and he's a sound head. He'd be a wonderful successor to Hank Paulson.

BARNES: If he's reelected as mayor, he can still come back. He can step down and become treasury secretary. It's a little higher in the pecking order than mayor of New York, which is an important job. But treasury secretary — and I bet he would take it if it were offered, and he should take it.

The term limits thing, you know, I like term limits laws but even if he gets over this one, you know what he's got to do, he's got to revive the financial sector, which is taking a beating. A lot of these companies that were there don't exist anymore. Cutting taxes might attract some of the financial groups that left to come back to New York City. He might try that.

Anyway, don't go anywhere. "The Buzz" is coming up next.

(COMMERCIAL BREAK)

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

KONDRACKE: Here's an honor roll. There were 41 members of Congress, House members, who are in tough races this year. Precisely nine of them voted in favor of the rescue package on Monday, resisting public opinion. The letters were running 100-1 to this thing. There they are, six Democrats, three Republicans.

Now, John F. Kennedy, in "Profiles in Courage" said one mark of "Profiles in Courage" is the ability to resist furious public opinion when it's running against you to do the right thing. Those guys did the right thing.

BARNES: You know what Ronald Reagan said about voting for something unpopular? Don't worry about what you're voting for is popular or unpopular. See how it's going to affect things.

And, look, if the people, who voted against the bailout package — and a lot of them were Republicans — I think we saw them vote against it on Monday and it was defeated that what happened afterwards was disastrous and it could be worse. That's the important thing. What is the effect? You vote against something unpopular and it turns out well, the effect is good, that's what you ought to worry about. I'd add people on that roll, like Paul Ryan and Eric Canter, Roy Blunt and John Boehner. But I agree with those nine.

All right, that's all for "The Beltway Boys" 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

Content and Programming Copyright 2008 Fox News Network, LLC. ALL RIGHTS RESERVED. Transcription Copyright 2008 ASC LLC (www.ascllc.net), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Fox News Network, LLC'S and ASC LLC's copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.