This is a rush transcript from "On the Record ," November 20, 2008. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: David Letterman cannot seem to stop talking about Governor Palin. Letterman had CBS anchor Katie Couric on as a guest last night. The topic of Governor Palin came up.


COURIC: A few vice-presidential questions I asked Senator Biden and Governor Palin what do they miss most out on the campaign trail. We didn't run that, for example.

LETTERMAN: What does she miss? Fresh moose meat?


COURIC: She actually said she missed running every day, and Senator Biden said he missed being chairman of the Senate Foreign Relations Committee.


LETTERMAN: I mean, in looking back on it now, it seems stranger looking back on it than it was going through it a little, doesn't it?

COURIC: Maybe to you.

LETTERMAN: No, but doesn't the campaign just --

COURIC: Oh, the campaign itself?

LETTERMAN: Essentially out of nowhere, here she is, can't name a newspaper, wants to be vice president, the first vice-presidential candidate that I found myself being aroused about.

COURIC: Thank you for sharing.


LETTERMAN: Now, there must have been more videotaping. You can tell me the stuff that you couldn't air. There must have been something.

COURIC: I'm sorry to disappoint you all.

PAUL SHAFFER, LETTERMAN’S MUSICAL DIRECTOR: I'm disappointed. But I, too, was aroused by the governor of --



VAN SUSTEREN: Joining us is Mary Matalin, former assistant to President George W. Bush. And, Mary, I want to get to the arousal comment.

But, first, it struck me that David Letterman said that she, "Came out of nowhere." I was struck--didn't he know who she was before this? I mean, she was a governor of the biggest state in the union. And many of the rest of us knew who she was. He's the one who looks ignorant.

MARY MATALIN, FORMER ASSISTANT TO PRESIDENT BUSH: Well, of course, Greta. Bingo, you've hit the nail on the head.

The year before Newsweek or Time had run a big series on the up and coming great governors and all the progress they had been making and what cutting edge they were and what an expert she particularly was on energy and on ethics, and she had cut her budget and had this great popularity.

Not out of nowhere. It was based on something. She was completely reforming and rejuvenating the governance of that state.

So for him not to know her says as much -- says more about him than it does about her.

Watch Greta's interview

VAN SUSTEREN: Well, he looks stupid. I mean, he looks ignorant. Only because that's his business--not to others, but it sort of is his business. So it's sort of shocking.

Now, the arousal comment. What do you think of that? What do you think of that?

MATALIN: You know -- all right, this is in the milieu or the vernacular of Katie, TMI. You know how men when they get to a certain age, because we're sort of at that age, they want to convince you that they're not having any issues. So they just want to convince us that all is functioning quite well.

It's just sort of creepy in that high school-boy way. You're from the Midwest. Your mom said that boys that are talking aren't getting any. It kind of creeped me out in that way. And I'm with Katie--TMI.

VAN SUSTEREN: TMI, indeed. But it's sort of interesting because he is someone who is, you know, has -- he's very visible. You would think that he would be a little bit embarrassed himself that he didn't know who the governor of the biggest state of the union was. And then he makes this sexual reference. I don't know, whatever.

MATALIN: Well, you know. On a more serious point, I did think it said too much about him in ways that he doesn't even realize, that he's exposing himself, so pun intended there.

But this whole--that whole cast of characters has been nothing but snarky and condescending to a woman who has charged up the party more than anybody else in the cycle, raised in 13 events $18 million, raised in one month $310 million for the Republican National Committee, raised record crowds at every single event that she went to.

She is a star for whatever she wants to do next. And, again, her record in Alaska, which didn't get very much developed out there, thank you mainstream press.

I mean, there's a reason she has an 80 percent approval rating. She's got a very solid record that anybody would die for. And as you know being up there, she's an incredible multi-tasker.

VAN SUSTEREN: Well, the thing that struck me most--hit her on the policies, disagree with her, but at least get out of your fancy studios and go up. And there were very few networks or even print journalists who even bothered to do that to give her a fair shake.

Go ahead and disagree with her, but give her a fair shake.

MATALIN: Didn't happen. But you know what? In the end, the American people are fair, and the American people will give her a fair shake.

And for every prison(ph) that she went to that was negative in the ends, in the end she came out popular enough to do whatever she wants to do going forward.

VAN SUSTEREN: Mary, thank you.

MATALIN: Greta, thank you.

Content and Programming Copyright 2008 FOX News Network, LLC. ALL RIGHTS RESERVED. Transcription Copyright 2008 ASC LLC (, 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.