This is a rush transcript from "Your World With Neil Cavuto," November 24, 2008. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We have made these kind of decisions in the past. Made one last night. And, if need be, we're going to make these kind of decisions to safeguard our financial system in the future.

(END VIDEO CLIP)

NEIL CAVUTO, HOST: All right, well, more to come? I have heard of too big to fail, but have we moved on to too many to ignore?

Let's ask Richard Grasso, the former chairman of the New York Stock Exchange, the very bastion of capitalism, right? Yet, Dick does not have a problem with some of our biggest capitalist institutions getting some big government help.

Really?

RICHARD GRASSO, FORMER CEO, NEW YORK STOCK EXCHANGE: I think that is good public policy, when the government steps in Neil, and recognizes that the free market has spun into a free-for-all market.

Video: Watch Neil's interview with Richard Grasso

What you saw in Citi last week, I mean, very, very hard to defend. I think the action taken over the weekend absolutely essential.

CAVUTO: Why?

GRASSO: It sends a message of confidence to consumers, to savers, to investors, and, more importantly, that the broader financial system is not going to have to deal with a bank with a $1 trillion worth of deposits going into a state of disarray.

CAVUTO: But what if the same thing happens to Bank of America? What if the same -- you know, on and on, we go.

GRASSO: Well, I think the government's role here is to get in there and stabilize as quickly as they can, and then get out.

One of the problems I hope we will address in the new administration is the issue of how you stabilize real estate, particularly homes, the homes that are on the teeter of default, particularly long-term mortgages that are now going to spring to level that the consumer can't afford them.

We're at a debt level that has never been -- has never been examined closely. I think what we can do, as a government, is to step in and do a massive refinancing, put out 40- or 50-year paper, stabilize the real estate market.

CAVUTO: You know what retirement has done to you? You have become like a liberal. You trust the government.

GRASSO: What -- what do you mean by become?

(LAUGHTER)

CAVUTO: No, you know what I'm saying? I mean, it just -- it is out of control. I mean, I can understand the reasoning. Look, we -- too big to fail. And then all these other institutions too big to fail, too big to fail. And then the auto industry comes up. We had the housing industry today wants a $200 billion relief package.

It is getting crazy, Dick.

GRASSO: Create the right stability in real estate and in our financial institutions.

CAVUTO: We're not. We're throwing money like, you know...

GRASSO: Well, I think it is yet to be seen the impact of some of the actions went TARP when got reversed into capital infusion.

(CROSSTALK)

CAVUTO: But, see, that was proof they were making this up as they were going along.

GRASSO: Well, I don't think they were making it up.

I think what you heard the secretary say is that facts were changing. Circumstances...

(CROSSTALK)

CAVUTO: No. He said, you know, like, when you recode the words, I was making this up.

(CROSSTALK)

GRASSO: Remember, this is not the NFL. We can't have an instant replay here, Neil, OK? So, you have to take what we have done and move on to something better.

CAVUTO: Yes, but with the NFL, it is not as if you are throwing billions on the chance that, if you re-watch the videotape, you will think, hey, I'm not going to do that again.

GRASSO: Well, I think what you do have is a set of public policy- makers, both in terms of the incumbents and those coming in, who recognize the real challenge is stabilizing financial markets. They're going to do that.

CAVUTO: They are not stable. Don't buy today's -- you know what has happened.

GRASSO: Well...

CAVUTO: In six out of seven rescues, it is down the next day.

I don't know what is going to happen. But I do know this. The Dow is down 3,000-plus points since they talked about this, right? There's not a great deal more lending going on. And maybe it happens eventually, but it has not happened yet. So, we have spent, you know, what, $1 trillion, $2 trillion, who knows, and...

GRASSO: Are we closer to the bottom or to the top?

CAVUTO: I have no idea. You're the money guy.

(LAUGHTER)

CAVUTO: And we keep spending money on this.

GRASSO: You are the financial expert sitting here day in and day out.

Closer to the bottom or to the top?

CAVUTO: Well, what do you think?

GRASSO: I think certainly closer to the bottom than the top.

(CROSSTALK)

CAVUTO: All right.

But what if there is another prominent money center bank that runs into trouble? And if Dick Grasso is right, you have got to run to rescue them. And the auto guys are saying, well, this is too much. You have really got to rescue us. And the housing guys are saying, you have really got to rescue us. And the petrochemical guys, who are moaning lately, say, you have really got to rescue us, and -- you know?

GRASSO: I have not heard the pitch for media yet.

CAVUTO: Well, financial anchors, I'm all for bailing out. That, I'm for.

(LAUGHTER)

CAVUTO: But you see what I am getting at here?

GRASSO: Are you becoming a bank holding company?

CAVUTO: I am. I am going to be become the Bank of Cavuto, because, man, oh, man, you are off to the races.

GRASSO: A very prominent -- a very, very prominent bank, I might add.

(CROSSTALK)

CAVUTO: But do you worry where this is going?

GRASSO: Absolutely.

You have to worry about that, because capitalism has an inherent responsibility of success and failure. And we're not going to let...

CAVUTO: But capitalism is not about the government bailing your sorry behind out, right?

GRASSO: No, no, understand, understand -- remember, go back to the discipline that Maggie Thatcher taught us more than 25 years ago. Send government-controlled entities to the discipline of the free market.

We are going to do that again.

CAVUTO: Did she ever bail out anybody?

GRASSO: We are going to do that again.

(CROSSTALK)

CAVUTO: The irony lady never bailed out anyone.

GRASSO: She did not bail anyone out.

CAVUTO: No. See that?

GRASSO: She sent them all out into the cold. And they got stronger.

CAVUTO: I knew the iron lady. The iron lady was a friend of mine. This is no iron lady going on.

I have no idea what I just said.

(LAUGHTER)

GRASSO: I think we are in the middle...

(LAUGHTER)

GRASSO: Remember, this is Thanksgiving week. All right?

(LAUGHTER)

CAVUTO: Well, could I ask you your thoughts on the Obama economic team, what you have seen so far?

GRASSO: I think it's an absolute home run.

Geithner is someone who has been in the middle of financial markets and in the infrastructure. He knows the plumbing. He knows the people. He knows the problems. Grand slam home run.

CAVUTO: He is a brilliant guy. And what I think is cool about him is, he speaks fluent Mandarin. So, just for his confirmation hearing, I would be speaking Mandarin the whole hearing.

GRASSO: I would opt for an Italian myself.

(LAUGHTER)

CAVUTO: What about the rest?

Larry Summers is there in this Bob Rubin-esque economic czar role, but Summers is a guy with some baggage, right? He was for some of this aggressive housing lending as a deputy treasury secretary. Could that come back to bite him?

GRASSO: See, I don't look at it as baggage. I look at it as great experience, OK? I think, look, you learn from that which you have done. Larry Summers has been our treasury secretary, brilliant, as you say, economic mind, has seen some successes, has had some setbacks.

I think it is a terrific team. I think the American people will benefit enormously.

CAVUTO: All right, you have got Summers in this economic czar position. You have got Geithner running the Treasury. Are there going to be food tasters there or what are they going to have to do?

GRASSO: I think that is the beauty of a Lincolnesque-type Cabinet. And that is what this incoming president has. He's bringing the best minds.

CAVUTO: Well, you had the best minds, and they turned on you.

GRASSO: Well, you know, that is -- that is capitalism at its finest.

CAVUTO: That is a good reason for having not-so-great minds.

GRASSO: Eat your own.

(LAUGHTER)

GRASSO: And eat your young.

(LAUGHTER)

CAVUTO: Dick Grasso, great seeing you.

GRASSO: Always great to be here.

CAVUTO: Thank you very much.

By the way, you think, then, we're closer to the end of this now?

GRASSO: Absolutely.

CAVUTO: All right.

So, as far as the severity of the recession, how severe?

GRASSO: Well, it's going to be a severe recession.

CAVUTO: Right.

GRASSO: And we are not going to see a turn probably for the -- until the second half of next year, maybe into the third quarter of next year.

But, remember, Neil, America is not going out of business, all right? And this is a global problem which will be solved globally by American leadership.

CAVUTO: We are competing with France on socialism. You realize that.

GRASSO: I am happy to have that competition.

CAVUTO: Oh, really? It's not Italy. I didn't say Italy. I said France.

GRASSO: Remember, it is Thanksgiving. Don't forget the cannolis.

CAVUTO: You're right. You're right.

(LAUGHTER)

CAVUTO: Dick Grasso, thank you very -- we always say he is one of my people who did good, you know? All right, good...

(LAUGHTER)

CAVUTO: Good seeing you, as always.

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