This is a rush transcript from "The Journal Editorial Report," November 22, 2008. This copy may not be in its final form and may be updated.

STUART VARNEY, GUEST HOST: Coming up on "The Journal Editorial Report," stocks soar on the word of Obama's treasury pick. And who is Tim Geithner? And what would he bring to the table?

Plus, bailout fever. The big three aren't the only ones lining up for a piece of the pie.

And Mormons are taking the heat for the passage of California's Proposition 8. But who actually voted for the gay marriage ban?

"The Journal Editorial Report" begins right now.

Hello, everyone. Welcome to "The Journal Editorial Report." I'm Stuart Varney, in this week for Paul Gigot.

The Dow surged Friday on word that Barack Obama will tap New York Federal Reserve president, Tim Geithner, for treasury secretary. The near 500-point rally late in the day after an otherwise disastrous week on Wall Street was a clear sign of just how anxious the markets had been about the direction of the new administration's economic policy.

In today's weekly Democratic radio address, President-elect Obama said he aims to create 2.5 million jobs in a two-year plan to stimulate an economy facing, quote, "a crisis of historic proportions."

Joining the panel this week, Wall Street Journal columnist and deputy editor Dan Henninger, assistant editorial page editor James Freeman, and opinionjournal.com columnist John Fund.

James, to you first. What does Tim Geithner's move to the Treasury tell us?

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Certainly, it was a positive sign as interpreted by the markets on Friday. But basically, people are giving him credit for managing this last year of financial crisis. I think you have to ask whether he was, in part, contributing to it. Go back to March and Bear Stearns, that decision to bailout an investment bank, the government had never done that before. I think it created uncertainty in the market. It made all the other financial CEO's look to Washington instead of fixing their companies and...

VARNEY: You're critical of his track record?

FREEMAN: You can't look at the years of bailouts and say, boy, that worked as everybody hoped it would. Stocks have gotten crushed. It created uncertainty. I'm glad the market rallied. Obviously, if people take comfort that there's continuity here, that's great. But what we're getting is a lot more intervention in the markets. If you look at the last year, that's had a lot of destructive effects.

VARNEY: Dan, I see former Treasury Secretary Larry Summers has a role in the administration. What is it? And what's it tell you?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Yes, Stuart, this is a somewhat surprising development. The reporting on the Geithner story noted that Larry Summers is going to join the White House as an economic adviser. Now, on the one hand summers lost out the Treasury job because of feminist opposition.

But if I'm Tim Geithner, I've got to be wondering if you have a former treasury secretary in the White House close to the president giving him advice on economic policy, who's the treasury secretary in fact, Larry summers or Tim Geithner.

I'd make a second point as well. Tim Geithner regards his years at the IMF in the middle of the 1990s when the United States bailed out Mexico and the Asian economies as one of his proudest moments. That was during the Clinton administration. Larry Summers was there as well. This is a red flag because the policy was devaluating currencies — devaluing currencies and raising taxes. Extremely interventionist. If we're going to return to the policies of the mid-1990s, I think we could have a problem.

VARNEY: But you could say there is bailout experience, and a great deal of it.

HENNINGER: You can put it that way for sure. Lots of bailouts.

VARNEY: John, let's move away from Treasury and move a bit more towards politics for a second. Hillary Clinton, we understand, on track to be the secretary of state. Can you make the case that Hillary at state is a plus for the Obama camp and that Bill Clinton is a plus for the Obama camp?

JOHN FUND, OPINIONJOURNAL.COM COLUMNIST: Bill Clinton will do what Bill Clinton does, but I think he will be somewhat circumscribed because obviously Hillary Clinton would not him interfering overly in foreign policy. I think he'd stick to his philanthropic knitting.

Of course it would be a plus for Obama. It removes the single greatest potential rival he has in the Democratic Party and within the U.S. Senate. She basically would have to give up on partisan politics. She would take instructions obviously, in the end, from Barack Obama or Rahm Emanuel, the chief of staff. If she takes it, and I'm not sure it's going to happen, it will effectively mean she's largely taking herself out of the running for a future presidential race, and certainly from any possibility of challenging Barack Obama should his administration turn out very badly.

VARNEY: Do you see this as a plus for the Obama team. There's no negatives here?

FUND: There certainly is because the Clintons are the elephant that fills the room. They're larger than life. She's not used to taking orders from anyone. We know that from the Clinton years. Bill Clinton has always had the potential of getting into the head lines.

VARNEY: Look more broadly. Bill Richardson, at commerce; Eric Holder, attorney general; Greg Craig, White House counsel; Hillary on track for state; Tom Daschle, health — all these names we know from the 1990s, most from the Clinton era. This is back to the future. What's going on?

FUND: It's a great reunion party.

VARNEY: OK, you can put it like that.

James, what do you say?

FREEMAN: Liberal Democratic friends are kind of shaking their heads and saying, we would have voted for her if this is what we wanted, the Clinton reunion. This is not the change I think a lot of Obama voters were expecting.

HENNINGER: I don't think there was ever really going to be change. The change that they were promising was no more George Bush, but they weren't coming into office to propose something new in Democrat policy. It's going to be a very post-Vietnam traditional Democratic administration. He's already promised in his Saturday morning address tremendous amounts of public spending on infrastructure, roads, bridges. There's nothing really new about that, but it is a change from the Bush administration.

VARNEY: What do you make of this, John?

FUND: I think the Democratic Party has become a captive of many of its expression interest groups. They're going to be well represented in the Obama administration. But on broad macroeconomic issues, I think Obama is going to be very circumscribed because we're going to have an extremely weak economy. And as much spending as they're going to need, I predict there will be no tax increases the first year because there's not a single school of economic thought that says in the middle of a deep recession you raise taxes.

VARNEY: John, is it a unified Democratic party?

FUND: I think it largely is, especially if Hillary Clinton is brought into the fold. I think Barack Obama starts with perhaps the greatest expectations but also the greatest good will that any Democratic president has had in a long time. He may have enough clout to challenge Nancy Pelosi and Harry Reid not to lead with congressional agenda items that will be controversial, such as, for example, the union card check or gays in the military or massive environmental programs, that might distract from the macroeconomic programs that Barack Obama's planning.

VARNEY: James, from what you said earlier, this is going to be an interventionist administration? We're going to get a lot more government and a lot more government spending?

FREEMAN: Those are the signals. By way, I think the Democratic Party was united behind Barack Obama without him picking Hillary Clinton. But I think Geithner, the rest of them, what's missing here is the big signal we are going to create in the United States incentives for all this private capital on the side lines to get in the game and invest. You can't create a stimulus package big enough to grow our economy. You need to encourage people with private money to invest.

VARNEY: The news just keeps on coming, doesn't it?

When we come back, bailout fever, the big three aren't the only ones lining up for a piece of the pie.

(COMMERCIAL BREAK)

(NEWS BREAK)

VARNEY: Democratic leaders in Congress have put off of a vote on bailing out the auto industry until next month when they say auto makers must present a plan that shows the money of how it will make them viable. The announcement came after the heads of Detroit's big three auto makers made their plea on Capitol Hill for a $25 billion life line. The heated hearings offered a preview of the pressures on the Obama administration that it is going to face come January from automakers and a whole host of others looking to get a piece of the bailout pie.

Kim, let's begin with you, because this bailout is not just about economics and money. Line up the political forces at work here, please.

KIM STRASSEL, WASHINGTON COLUMNIST: You know, the thing to understand, Stuart, is that if the Democrats felt this was such a huge problem, they could have given Detroit money this week. The problem is, one, they don't want to have to take responsibility for passing new money, which is why they've been trying to get the Bush administration to include this bailout as part of the $700 billion rescue plan that they passed back in September.

The other thing is the White House came to them with a compromise this week and said, hey, why don't you take the strings off money you passed back in September, $25 billion, that was supposed to be used for increasing emissions, and let them have that. Nancy Pelosi said no to that because her environmental community went bonkers with the idea. They're really in a situation here. They're stuck between a lot of different forces. And I don't see how those forces change it all in a two-week time.

VARNEY: OK.

James, Michigan says you've got to save the industrial base. You've got to save jobs. Is it good national policy, however?

FREEMAN: No. It's not even good for Michigan over the long term. It's clear that the Fed had some role in crushing Detroit's SUV sales earlier this year with monetary policy. But people who read the business section, who read the journal, who follow business news know that for years we've been reading with the problems in the North American business for all three of these companies. They've had to fix North America. They've overpromised on pensions. They overpromised on all kinds of union benefits, pay. On top of that, Washington has imposed green regulation mileage standards that don't seem to hit their intended effect, but do cripple the big three. These are just fundamentally unprofitable firms. Until that's fixed, any money from Washington is not going to give you a turn-around.

VARNEY: Kim, real fast, Henry Wexler takes over the committee chairmanship of Energy and Commerce. I take that as a huge hit for Detroit?

STRASSEL: Absolutely. The guy who took it over from John Dingell has been there for eons. He's been a very passionate advocate for Detroit. Because he cared about that constituency, he's been a voice of reason on things like CAFE standards, on other regulations that are only going to hurt Detroit more if Democrats move ahead to enact them. So this is not a good sign. It's a provision of the more loony left of Democratic Party taking over.

VARNEY: All right, Dan, I see financial companies, insurance companies, car companies. The line starts there. Who's next in line?

HENNINGER: Probably the states and the cities. They all have tremendous deficits. They say they can't pay their bills. Now they want part of the bailout as well. I think we're getting into dangerous ground. The TARP idea is getting quite out of control.

Look, states and cities have the authority to issue bonds. That's the way they raise money. If they have problems, they should look to their own fiscal houses to solve them, not cede authority to the federal government, which has been trying to take authority from the states and cities. This will create real federalism problems. The courts will watch the willingness of the states and the cities to cede authority to Washington and take that into account. There's a transfer of the American system going on here.

VARNEY: James?

FREEMAN: The hopeful news for taxpayers is that the reason these bailouts are running into political trouble is, you look at Wall Street, it's a kind of arcane, hard to understand thing. A lot of Americans say, I'll go with the TARP. The smart guys in Washington tell me it's necessary.

People look at state and local governments, they look at union-run auto companies, they know they're losers. They know the money is not going to be spent well there. It's not making sense to bail them out. Even though Democrats have both houses, Barack Obama, you might find it tougher going politically to get these bailouts through.

VARNEY: That's politics. But we are going to spend money. Our way out of this economic problem is to spend money and Obama's going to do it.

(CROSSTALK)

HENNINGER: Well, I think they're going to engage in the greatest Keynesian experiment in the history of the world. We're talking of a stimulus package over two or three years of $500 to $700 billion. The idea is just to give money to people, put money into the system and hope they spend it. We'll see if it works.

VARNEY: Last word to you, Kim.

STRASSEL: Well, the $700 billion rescue was necessary. You're now about to see everybody lining up for this additional money. City and states, which ones get it? What kind of infrastructure? This is going to be really fun to watch the next couple months.

VARNEY: We'll be watching it.

Still ahead, the backlash continues against Mormons across the country for the passage of California's gay marriage ban. But when we come back, a look at who actually voted for the ban. The numbers may surprise you.

(COMMERCIAL BREAK)

VARNEY: Election Day has come and gone, but ugly protests continue to rage across the country over the passage of California's anti-gay marriage Proposition 8. The target? The Mormon Church, which opponents say gave more than $20 million to the effort to pass the measure.

We're back with Dan Henninger and John Fund. Also, joining the panel is Naomi Schaefer Riley, who edits the Wall Street Journal's Houses of Worship column.

Naomi, looking at those demonstrations, I didn't see that much tolerance.

NAOMI SCHAEFER RILEY, EDITOR, HOUSES OF WORSHIP COLUMN: No, there certainly was not for a state that prides itself on tolerance. In the last couple weeks, there have been protests outside of churches, Mormon and otherwise. There have been protests outside of the individual homes of people. And there have been blacklists published all over the web of people's addressing and how much they've given to the Proposition 8 campaign.

VARNEY: That's intimidation. When you publish the addresses of those people who have contributed to this point, that's intimidation.

RILEY: It is. Absolutely. There have been a couple of people who have been driven to resign from jobs in the arts because they have been told that their intolerance is a problem for the people working in these organizations. There's some real intimidation going on.

VARNEY: John, the target is the Mormon Church. Should it be the Mormon Church? Should there be any target, because who, in fact, opposed gay marriage and tipped the vote?

FUND: Well, the Mormon Church was involved financially. But the votes of millions of Californians were involved. And if you look at just Anglo-Californians, gay marriage won. It was an overwhelming vote by African-Americans and, to a lesser extent, Hispanic and Asian Americans that defeated this measure.

I really believe that some of the politics of this are very complicated. Barack Obama brought clearly brought more voters to the polls but he also brought some voters to the polls who voted against gay marriage. That's an internal contradiction the Democratic Party may have to resolve.

VARNEY: Dan, is this a new target for the left?

HENNINGER: Well, it's interesting. Yes, the Mormon Church has been teed up. We thought previously it was Christian evangelicals. Evangelicals presumably don't trust Mormons. But it looks like maybe the Mormons and the evangelicals can make common cause here.

As to the politics in California, the issue has been thrown into the supreme court of California, which is going to rule on the constitutionality of the initiative itself.

But gay marriage has failed twice before the voters in California already. And I think there's some indication that gay leaders themselves, some of them are beginning to step back and say, you know, we have to do a little more work with the public out in California. We cannot expect to just force this upon them because the backlash and the divisions, as John suggested, that created inside the Democrat party out there are pretty significant.

VARNEY: What — I'm sorry. Go ahead.

RILEY: I was just going to say, I mean, there's an interesting demographic issue here, which is to say that a lot of people think of California as a liberal state. But it's also a huge home for a lot of the most populous evangelical churches. And the Mormons are the fastest growing religion in the United States. You're going to have a real issue just trying to convince the voters this is the issue that they should be going with.

VARNEY: John, if they go back to the courts, they could win?

FUND: You know, the California Supreme Court has a history of not going against voter initiatives. They wanted to overturn Prop 13 but they stopped short of that because they remember that several justices many years ago were recalled because they went against the will of the people.

And, by the way, there's also a bad public relations backlash here. I've talked to people who have had to change their phone numbers to unlisted because of all the harassing calls. I'm from Sacramento. For the director of the California Music Theater there to be forced to resign because he made a small contribution to Proposition 8 is frankly unconscionable. It's the kind of blacklisting that we've had hundreds of Hollywood movies about, but it's happening right now in California on a different level.

VARNEY: All right, that is the last word, but not for us entirely.

We have to take one more break. When we come back, our "Hits and Misses" of the week.

(COMMERCIAL BREAK)

VARNEY: All right, winners and losers, picks and pans, "Hits and Misses," it's our way of calling attention to the best and the worst of the week.

Item one, the pirates of Somalia — Dan?

HENNINGER: Yes, Stuart, suddenly, everyone knows there are pirates in the world and they are grabbing oil tankers bigger than aircraft carriers. We're told that even George Bush himself has said can't we do something about this. The problem is what do you do? The people who own the tankers and the ships often don't want military intervention. They would rather pay. Somali is a failed state. If you grab the pirates, they can bribe their way out of jail. Many of the western nations do not want the pirates on their territory. Alas, Stuart, summary execution is out, so.

VARNEY: Why?

(LAUGHTER)

HENNINGER: Good question. Well, that raises the point. These people represent a threat to the civilized world. But we have so elevated individual rights that we don't know how to fight these pirates. If we don't figure out how to do it, what they represent is going to pose a bigger threat than simply cargo ships.

VARNEY: I want to be a pirate lawyer, paid in doubloons. But that's another story entirely.

Naomi, a miss to American universities, right?

RILEY: Yes. Apparently, the talk in Washington is that the colleges of the United States would like part of the bailout. Surprise, surprise! If you can think of anyone less deserving than Detroit, the colleges will probably be out there. But their endowments has gone down, like everybody else's 401Ks. And they think that in order to meet their costs for the year and for future years, they should be given some government money. So the lobbyists are going to Washington to try to get a piece of the action.

And then the other thing that the other tactic that some of the colleges are talking about is perhaps suing their brokers for making bad investments of their endowment. So these administrators apparently haven't taken economics 101 and they would like to blame the brokers for the problem.

(CROSSTALK)

VARNEY: ... are wonderful.

RILEY: Yes, pass the blame along.

VARNEY: James, a hit to President-elect Barack Obama.

FREEMAN: Yes, a big hit to my president, Barack Obama. As of January 20th, he said recently in two separate television interviews, he affirmed that he supports moving to a true playoff system for college football. Right now they have a bunch of bowls, but they don't crown a champion. He wants an 18 playoff. Now I understand why all those college kids were so excited about Obama. I'm excited, too. This is change I can believe in.

VARNEY: You think it's a good idea?

FREEMAN: Absolutely. It's great. Some say it's not necessarily the most important issue he ought to be tackling right now. But as a bully pulpit issue, I think fans around the country are going to be thrilled.

VARNEY: Look, I put it to you, in the world of college football, that would be a huge change.

FREEMAN: Huge. Huge. And you think about this season. You've got eight teams who could arguably win a national title if it went to a playoff. He's picked a good time and, who knows, we might see action. The conferences are already having to react to his statement.

VARNEY: Final point, it would be good for TV ratings.

James, thank you very much indeed.

All right, that's it for this week's edition of "The Journal Editorial Report."

Thanks to my panel and to all of you for watching.

I'm Stuart Varney. Paul is back next week. And we hope to see you then.

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