This is a rush transcript of "Special Report With Brit Hume" from January 19, 2009. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

REP. STEVE KING, R-IOWA: The president does believe in the rule of law, but he also is compassionate. He has the authority to commute sentences or pardon them.

So everyone recognizes that the sentences that were delivered to agents Ramos and Compean were far too long. They were out of proportion with the actual crimes that they had convictions of. And because of that I think it is a good decision on the part of President Bush.

(END VIDEO CLIP)

BRET BAIER, HOST: Republican Congressman Stephen King from Iowa talking about the commutations, two of them, for former border patrol agents Ignacio Ramos and Jose Compean, found guilty in 2006 of shooting a Mexican drug smuggler.

Those were the only two actions by President Bush on the pardon front, the commutation front, on his last full day in office.

What about that? Some analytical observations from Fred Barnes, executive editor of The Weekly Standard, Nina Easton, Washington bureau chief for Fortune magazine, and Mort Kondracke, executive editor of Roll Call — FOX News contributors all.

Fred, some believe that the president might pardon, issue a full pardon, to Scooter Libby, the former chief of staff for vice president Cheney. He did not. Surprise you?

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: No, but I think he should have. He had already commuted his 30-month jail sentence. Libby did have to pay a quarter of a million dollar fine.

But the president is unwilling to give pardons unless it's a case where the judge and the prosecutor both are urging it. And that was not true in this case.

Now, I think, and the reason I said I thought there should have been a pardon, was because either he was innocent, Libby, or his offense was so small, there was no underlying crime, he no motive to perjure himself, and that's what he was convicted of.

And since then, there has been this study refers to by a couple of professors, the "Scooter Libby effect," and what this study found is that some inconsequential conversation that becomes a huge deal later, as was his conversation with Tim Russert of NBC, it's almost impossible to remember as much as you are demanded to remember. And that it got him in trouble, and so he did not get a pardon.

BAIER: Let's turn to the Ramos and Compean, if we could, Nina. He commuted these sentences. And this was really a rallying call for conservatives. Talk radio talked about this and the possibility of it for a long time.

NINA EASTON, WASHINGTON BUREAU CHIEF, FORTUNE MAGAZINE: It was a rallying call for conservatives, but it also had bipartisan support. Members, Democratic and Republican members from Texas were urging it, for example. And there was a great feeling that these border guards were doing their jobs.

Again, he commuted the sentence. He didn't grant a pardon.

What is really interesting about this president is that his level of pardoning is about half that of Reagan or, certainly, Clinton. And we could argue that the Marc Rich pardon probably poisoned the waters for any president after that, because after pardoning that fugitive financier, there is an unseemliness around a lot of pardons, I think.

And so the Scooter Libby front, I think he was very definitive last year when he commuted that sentence that was not going to grant a pardon. So while it wasn't a surprise, it was a disappointment to a lot of conservatives.

The other thing I wanted to point out—this president is, I think, quite turned off by the level of lobbying from a number of convicted felons. And I think that has an impact on everybody from Mike Milken, the former junk bond king, to former Senator Ted Stevens of Alaska, his advocates.

I think there was — this president feels a little distaste about that.

MORT KONDRACKE, EXECUTIVE EDITOR, ROLL CALL: Apparently there is an orgy of special pleading that goes on, with everybody who has got a relative who really wants to get off makes an appeal to somebody they know in the White House.

Whether or not there is any background in the case or if the Justice Department has even considered, they are all, you know, trying to get something done here.

And I think — and the president doesn't like it, and Karl Rove says that the president, this president especially, respects the judicial system and he doesn't want to interfere with it, and actually made a mistake by letting somebody off for tax fraud, and then pulled the commutation of the pardon back recently. But in the case of these two border patrol agents, they did not know at the time that they fired at this guy that he was a drug dealer. He turned out afterwards to be a drug dealer.

One of the border guards emptied his entire 14-round clip at this guy, missed him, and then his partner shot him in the buttocks. And then they covered it up repeatedly.

So they did commit an offense, and the judge threw the book at them. And I think it's legitimate, after they have served time in jail to commute the sentence. But they weren't pardoned.

BAIER: Fred, we'll leave it at this — President Bush has granted a total of 189 pardons, 11 commutations. That's fewer than half as many as President Clinton and President Reagan in their two terms. What does that say about him, about how he approaches clemency?

BARNES: I agree with what Nina said. I think the Marc Rich pardon really poisoned the well and turned off the public, rightfully so, about this process.

And the president particularly doesn't want to do pardons unless they go through the process to pardon—appeal for one, wait five years, get the judge and prosecutor behind you. Otherwise, the most he'll do is commute.

BAIER: Stay with us. We'll give you an up close and personal look at the commercialization of the inauguration when we come back.

(COMMERCIAL BREAK)

BAIER: Right now, here in Washington, you can just get about whatever you want with an Obama picture or logo on it. So we told Correspondent Brian Wilson to hit the streets and come back with something special.

(BEGIN VIDEOTAPE)

BRIAN WILSON, FOX NEWS: There is a hustle and bustle in your nation's capitol as thousands stream into the city each and every hour. Over at Union Station, there's a constant flow of humanity. And as soon as you exit the terminal, you are bombarded by people wanting to sell you stuff.

UNIDENTIFIED FEMALE: Just $5!

UNIDENTIFIED MALE: Just $5!

UNIDENTIFIED MALE: Time is money. Come on, let's go!

WILSON: Right now, anything that has the image of Barack Obama is a big seller. There are a lot of people making big bucks off Barack.

Buttons, t-shirts, trinkets, and geegaws(ph). Selling especially well — inaugural warm weather gear.

UNIDENTIFIED MALE: Eight dozen gloves, eight hats, and eight dozen buttons. So it has been-

WILSON: So you're staying busy?

UNIDENTIFIED MALE: Yes.

WILSON: So president Obama has already been good for your economy?

UNIDENTIFIED MALE: No question! No question.

WILSON: It's not just the street vendors who are cashing in. Every store is jammed with Obama goods. The Pepsi people noticed that their logo and the Obama campaign logo are similar, so they put up signs like this all over town.

Much has also been made of the fact that the Obama Inaugural Committee cashed in on the event by selling off the broadcast rights to a number of inaugural events.

So you really can't fuss too much about a hard-working guy who is just trying to make a buck in this economy, which is exactly what this guy was charging for a picture with an Obama cutout.

UNIDENTIFIED MALE: The spirit of change and the spirit of hope is truly in D.C. today.

WILSON: Now, do I owe you a dollar?

UNIDENTIFIED MALE: You know what? Since I like you, we will charge you 50 cents.

WILSON: That's a deal!

In Washington, Brian Wilson, FOX News.

(END VIDEOTAPE)

BAIER: And we're back with our panel.

Brian brought back this watch — that's what he brought back from the street. What about the commercialization of the inauguration? Panel, look at all this stuff. Mort, you have the apron on.

KONDRACKE: Yes.

They wouldn't be doing this if there weren't demand. This is a free enterprise economy, and because there is so much enthusiasm—I have been in Washington 40 years, and this is the 7th inaugural — sorry, the tenth inaugural, and the 7th of a new president, and I have never seen anything like this.

And I have to say that in addition to all this commercialization and all the hype and all that, Obama made today a day of service. And last year — Martin Luther King's birthday has now been officially designated as a day of service — last year, there were something like 5,000 official events around the country, service events. This year, 12,100.

Sop there is more than just commercialization going on. There is some good stuff.

BAIER: Charles Krauthammer went to a dinner with the president elect. I can't wait for the e-mails about this hat, Nina. But, anyway, what do you think? What's your take?

EASTON: Hey, spirit of hope, spirit of change, spirit of a dollar. In this economy, I'm all for it.

You know, let people enjoy. It's like the World Series. It is like the Pope's visit. Let them enjoy it.

I am amused by the convergence of corporate America — I mean, the street vendors are one thing, but the convergence of corporate America and the Obama inauguration, like Pepsi, whose chief executive is a long-time Obama supporter, is out there now with a brand called "Refresh Everything," and is sponsor of one of the most elite balls, the creative coalition ball here.

And Ben and Jerry's, the ice cream makers, long-time liberals, and they have the "Yes Pecan" brand. So it is kind of amusing to watch that. But, you know, I think if people are spending money, I think it's good. I think the only danger of it is that there is a level of idolatry that a president, particularly facing these economic times and these international times, is going to have trouble living up to.

BAIER: Fred?

BARNES: Nina, lighten up a little bit!

I love these vendors. They're out there. They're unregulated. There is no price controls. I doubt if they will have to pay a corporate tax. This is a tribute to free market economics — Mort referred to that. And I don't know who dreamed this thing up. It's a dog tag — you know a dog tag. This is not to be confused of a dog tag of somebody who has actually been in the military now, which Obama hasn't. But it's a nice trinket.

And I agree with Mort. There is a tremendous amount of excitement over Obama, and people want this stuff. Why not?

BAIER: What about HBO paying $2.5 million for the Lincoln Memorial event, Disney paying $2 million for the children's concert and neighborhood ball, MTV, $650,000 — what about that?

KONDRACKE: This is money that the Inaugural Committee really ought to send back into service contracts and make sure this is not a cash-in kind of thing.

BAIER: They say it pays for all these events.

EASTON: Stop, stop, stop. Anyone who watched that event yesterday, that was very expensive to stage. The lights, bringing in the talent, their hotel bills, the whole bit, they had to pay for that. And so this actually offsets a lot of that. You can't say it is like sitting in a coffer somewhere.

BARNES: I'm with Nina. We're overruling Mort. They keep the money and pay for the events.

BAIER: You can keep the apron.

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