This is a rush transcript of "Special Report With Brit Hume" from December 16, 2008. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

MICHAEL BLOOMBERG, NEW YORK MAYOR: Caroline Kennedy is a very experienced woman. She has worked very hard for the city. I can just tell you that she has made an enormous difference in New York City.

And clearly, being part of the Kennedy family, she has had lots of exposure. Her uncle has been s one of the best senators that we have had in an awful long time.

REP. GARY ACKERMAN, NEW YORK: I do not know what Caroline Kennedy's qualifications are, except that she has name recognition. But so does J-Lo, and I would not make J-Lo the senator unless she proved she had great qualifications. But we haven't seen them yet.

(END VIDEO CLIP)

BRIT HUME, HOST: Two Democrats from New York-well, I guess that Bloomberg is a one-time Republican, now and Independent speaking highly of Caroline Kennedy. Gary Ackerman is an out and out Democrat.

She is running now to the extent that you can run for a gubernatorial appointment, to be the successor to Hillary Clinton, who will have to vacate her job to be secretary of state if confirmed.

Some thoughts on this now from Fred Barnes, executive editor of The Weekly Standard; Mort Kondracke, executive editor of Roll Call and the syndicated columnist Charles Krauthammer — all FOX News contributors.

This is kind of fun, isn't it, Fred?

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: Yes.

But you have to start out acknowledging one fact, and that is that politics is unfair. People with famous names or from a famous background, they have an advantage. And I would have to say, if I were the governor of New York, a liberal Democrat, I would pick Caroline Kennedy for the Senate seat.

She has name identification. She does not have to worry about that. She can raise a ton of money just because of who she is, in the same way Hillary Clinton could to it. Any issue that she attaches herself to and talks about will become a bigger issue just because she is Caroline Kennedy.

And these members of Congress and these House members from New York ho think that, "Well, gee. I was in the state legislature, and I have been in the House for 10 terms, doing nothing very distinguished," that they have earned it. Well, that is not the way it works.

I remember when Howard Baker and Bob Dole and John Anderson back in 1980, they had all thought they had earned the Republican nomination for president, and what is this guy Ronald Reagan coming out of nowhere.

HUME: He had been governor for some time.

BARNES: I know he had, but what I am doing is pooh-poohing the notion that somebody earns it because they had in the legislature or the House, or so on.

Caroline Kennedy is at least as qualified as most of the members of the Senate. What can Susan Collins or Frank Lautenberg do that Caroline Kennedy can't?

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: The job does involve a certain amount of preparation, of knowledge of how to legislate, and stuff like that. She is going to have to learn a great deal.

She has got great advantages. She has good political genes. She has good political instincts. She leapt into the presidential race at just the right moment along with your uncle to push the nomination toward Barack Obama.

And she has done public service. She is an ally of Joel Klein, the New York's schools chancellor, who is trying to reform the place. She has raised about $7 million to help him hire qualified principles schools. She does have some experience. And she will certainly add luster.

And I think the crucial thing for Paterson will be who will best help his ticket, his election, in 2010. And it seems to me clearly Caroline Kennedy.

HUME: She would be at least as qualified as Ted Kennedy was when he was first elected all those years ago.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: It's not a question of experience. You often get inexperienced candidates who come out of nowhere. You get rich businessmen and the occasional actor or sports star.

It's a question of entitlement. The only thing she has that makes her somebody to even be considered for this office is pedigree. I mean, I hate to be a good government scold, but I would think that one of the reasons for the American experiment is to abolish the idea of government by pedigree.

Now, of course, we have in history — the Adams and the Harrisons, the Rockefellers, the Kennedys and the Bushes. But it seems a bit of an epidemic these days.

First of all, you have a senate stacked with plutocrats as a result of our campaign finance laws, which give an enormous advantage to anyone who is a rich. They run, and the opponent has to grubbily raise money, and you end up with a sizable number of very rich people coming out of nowhere in the Senate.

And what you also have is what we saw, as you said in the Kennedy case, where John Kennedy had his college roommate, Ben Smith II, sit in his seat until two years later until Teddy was old enough and had reached the age of 30 when he inherited it.

And Biden has done exactly that in Delaware. He has gotten a family retainer appointed now to the Biden seat who will keep it warm and will not run again when in two years the Biden son, who is not in Iraq, will return and take that seat.

Look, Caroline Kennedy is a worthy socialite. But if she wants it, she should run and not accept an appointment. It is OK to run on pedigree, but do it in an election and not in an appointment.

HUME: What do you think, Fred?

BARNES: She will not do that. There will be some incumbent that she will have run against in the primary.

HUME: You mean she wouldn't win?

BARNES: She might not — if Governor Paterson appoints somebody else, and that person has to run for election in 2010 —

HUME: There will be an incumbent.

BARNES: Yes. She will not do that and shouldn't be asked to do that.

Sometimes the people come along in these family traditions turn out to be great. I mean, John Quincy Adams may not have been a great president. He was an awfully good secretary of state, and on and on.

Look, do not hold it against her that that is her name —

HUME: No way is it against her.

KRAUTHAMMER: Charles does, and people do because they don't like the idea of dynasties.

KONDRACKE: There is one answer to the dynasty issue. Barack Obama. No pedigree, middle name Hussein, president of the United States. This is still a meritocracy.

KRAUTHAMMER: Or change the Senate and call it the House of Lords. That's what it's become — inherited seats.

KONDRACKE: Not yet.

HUME: We will talk next about the status of that auto industry bailout. Stay tuned.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

HENRY PAULSON, TREASURY SECRETARY: The purpose of the TARP and the intent of the TARP had always been to deal with the financial system. It had not been to deal with manufacturers.

That is not to say the manufacturers are not important, but that was not the purpose of the TARP. And congress was working towards a solution, and, unfortunately, they had to leave without coming up with one.

(END VIDEO CLIP)

HUME: And so, says Hank Paulson, he and his team at Treasury are going through the books particularly of Chrysler and GM with a fine-toothed comb, trying to figure out how they can provide money from the TARP to those companies in some amount to keep them going, but not in such a way to enable them to continue to go in the way that they have been going.

So the question is what will happen here. It appeared that the labor unions had won, that the president's hand had been forced, that the money will come from the TARP after all, which is what the Democrats and in congress and labor wanted. Is that how this is likely to play out Charles?

KRAUTHAMMER: Yes, the labor unions have won. Paulson conceded in the end he would not allow the auto companies to go under, and once he did that, he lost all his leverage.

I think this is another Paulson —

HUME: Wait a minute — if he imposes conditions for the money, though, they stand, do they not?

KRAUTHAMMER: If the UAW says no, what is he going to do? Let the auto companies collapse? He has said in advance and in the present said in advance he will not allow it. He has boxed himself into a position where he says he is not going to allow the company on his watch. That means he has no leverage.

This is another mistake. It's the end of the term. What Paulson ought to do is that GM is said it's burning $2 billion a month. We are a month and a few days away from the inauguration. He ought to give gm $2 billion and change and let the Democrats handle this.

The Democrats are going to have to make a choice. Support a lemon socialist industry that is sustaining an unsupportable wage structure, or they be the ones who negotiate and get hard conditions and concessions out of labor.

Right now the Republicans are the bad guys. The southern senators are being attacked as people who are anti-union. Why should the Republicans have all of that on their back? Let the Democrats, who have UAW and unions as their constituency, negotiate a settlement and agreement in concessions.

For Paulson to attempt it with a month to go is a mistake. It can only lead to concessions on his part and no settlement that is going to last in the future.

HUME: Is it your view, Mort, do you agree with Charles that if the money is pushed out onto the table and they say you can have the money, but sign on the dotted line. And if they do not sign, he then caves again?

KONDRACKE: Yes. I think that the administration definitely does not want the auto industry to collapse on its watch, or even go into Chapter 11.

HUME: That's not collapse.

KONDRACKE: It's not collapse, except that suppliers will go bankrupt as well. And you do not know how many people will be thrown out of jobs, whether people will ever buy American cars with the companies in bankruptcy because they fear they will not get auto parts and stuff like that.

It would require an enormous convincing job to tell people these companies are still viable down the line even though they have declared bankruptcy. I do not think most people understand what bankruptcy is.

So I think that Charles is right, that since they have said that they can't allow these companies to go bankrupt — I think they have even used that term — they have lost a lot of leverage.

And I think the idea of a very short-term bridge loan, passing this on, letting them survive, but passing it on it to the Democrats, who will have to deal with it, ultimately, anyway is the right thing to do.

BARNES: I think Paulson does have leverage. He still has the money. He has not given up yet. And the thing he can do is pocket the concessions that have already been made, all of the stuff that was agreed to.

That means the bondholders have to be dealt with, given stock paid off 30 cents on the dollar. The UAW has agreed to take stock for at least half of money owed the pension fund, to kill that jobs bank and that supplemental unemployment fund too, all of those things. But the one thing that the UAW objected to was agreeing to a pay cut in 2009. OK. Let Democrats try to get that, but impose all these things now, because have already been agreed to. Say, "You have to sign up for these. You agreed to them. And you can have some money."

But Paulson does have the leverage. He does have the money.

HUME: Even Barney Frank wrote a letter to Paulson, I believe, saying please impose conditions, even citing that conditions had been agreed to.

BARNES: These had been. If they just go along with the House bill, that would be nothing.

KONDRACKE: Basically, these conditions had been agreed to with the Democrats. I do not think these have been agreed to by the UAW.

(CROSSTALK)

BARNES: I think they had. It was only the pay they balked at.

And so let's pocket these and go ahead. That would be a big step forward, right there.

KRAUTHAMMER: All of these concessions are already accepted and have already happened in the Senate. So it is as if he is extracting anything. The real issue is the cut in wages that the UAW had resisted. And that he is not going to get.

BARNES: They didn't pass, though. They may have gotten an agreement, but then the whole thing fell apart.

KRAUTHAMMER: Everybody assumes Paulson will get that. The only question is, is he going to get what the Republican senators did not get? And the answer is no, he is not going to get that.

BARNES: I agree. He is not going to get the pay thing—

(CROSSTALK)

HUME: Is pay the problem, or is it the benefit structure?

KONDRACKE: Actually, the pay minus the legacy costs, that differential, is not that great. And I do not understand why the UAW wouldn't agree to that, because that is not a big comedown.

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