This is a rush transcript of "Special Report With Bret Baier" from February 23, 2009. This copy may not be in its final form and may be updated.
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SEN. CHRIS DODD, D-CONN., SENATE BANKING COMMITTEE CHAIRMAN: I think that's unfortunate, but it may come to that. I think the administration is resisting it. They prefer not to go that way for all of the reasons that we're familiar with in terms of the symbolic notion of nationalization of major lending institutions.
ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: The president believes that a privately held banking system regulated by the federal government is the best way to go about this.
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BRET BAIER, HOST: The talk about nationalizing banks on a day when the government held talks with Citigroup that could give Washington a 40 percent stake in that bank.
What about this idea, and if it's gaining traction here in Washington? Now some analytical observations from Bill Kristol, editor of The Weekly Standard, Juan Williams, senior correspondent of National Public Radio, and syndicated columnist Charles Krauthammer — FOX News contributors all.
Bill, a lot of talk, even former Fed Chairman Alan Greenspan saying this could be the right move.
BILL KRISTOL, EDITOR, THE WEEKLY STANDARD: It could be. It looks like these big banks have to be liquidated one way or the other, and nationalizing them for the purpose of liquidating them might be the quickest way. You do not want these huge zombies walking around sucking up capital.
I don't believe the stress test will work to expose — I'm told by people who know a lot more about this than I do — to expose their bad loans, that it's going to be very hard to really discover the state of it.
So maybe the quickest thing is just to them take over and then break them into parts and get rid of them.
There is this expression "too big to fail." These banks are too big to save. They really could suck all the oxygen out of the economy unless especially the two big ones, Citi and Bank of America, are dealt with pretty quickly, I think.
JUAN WILLIAMS, SENIOR CORRESPONDENT, NATIONAL PUBLIC RADIO: The thing about is, look at something like Citibank. What's really — I had to read these numbers again, but they have 200 million customers, and they are all over the world.
So if a bank like that fails, where does it go? What happens to all those people? We insure — the FDIC insures — investments in the banks, people's savings and the like. So then we are picking it up.
So, essentially, already the banks are nationalized, because what you're seeing is that the assumption on Wall Street is the government is going to insure these banks, and, as a result, private money is not going into the banks. That's why the stock prices are dropping. And to that extent, we already have nationalized that bank.
Now, that's Citi. The question is what about Bank of America and what about the other banks? Are we going to go to that extent?
BAIER: It's a slippery slope here, Charles.
CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: But it appears as if we're going to slide all the way down.
It seems to me almost inevitable. What you have is banks which are essentially insolvent, and we're not going to allow a run on the banks, on the customers of Citi in over 100 countries.
So we know that in the end — it's like what we thought about Freddie and Fannie—in the end, people understood that the government would end up nationalizing it. And it did. It nationalized AIG as well.
Greenspan had said every 100 years you have to nationalize the banks. Well, twice a week the FDIC takes over a small bank. This is just a question of scale. It's not a question of principle here.
I think it's inevitable that Citi will be taken over — 40 percent now, maybe 80 percent and then 100 percent. And the way to do it — it's a way of removing the toxic assets by subtraction. The idea of pulling them out of a living bank appears to be impossible, because nobody will agree on the value.
So what we do is we acquire the whole bank. We break it up and we sell off the good stuff, and then the government ends up with the toxic assets. It creates, essentially, a bad bank.
And I think that's ultimately what is going to happen.
BAIER: But, at least right now, Bill, this administration is saying it's not going to do that. Are they bluffing? Are they stalling? What's happening?
KRISTOL: Well, they are understandably timid about doing such a huge thing, but I do think that they are now getting the worst of both worlds.
President Obama said "We recognize that we needed to act boldly and decisively and quickly, and that's precisely what we did." The one thing the president hasn't done is to act boldly and decisively and quickly on the banking crisis and the banking crisis is the key.
They keep saying, the Obama people, there are three legs to the stool: housing, stimulus package and banking. Banking dwarves the other two in its importance. They need to get that right, and they need to act decisively. And it may be that nationalizing for the sake of liquidating is the way to go.
For one thing, there are a lot of smaller banks that are in excellent shape, who didn't make foolish loans and didn't collateralize their mortgages. You don't want these big zombie banks sort of walking around preventing these little banks from engaging in normal commercial business.
BAIER: Clearly Wall Street is not confident about what's going on here in Washington, at least if you look at the numbers.
KRAUTHAMMER: When Gibbs issues this ridiculous denial/non-denial — the president believes in a private banking system. Sure, all of us do. But, as I said, twice a week it takes over a bank somewhere.
It doesn't answer the critics, and what you get is uncertainty — added to existing economic uncertainty is political uncertainty. The uncertainty that Gibbs and the president have created has led to wild swings in the prices on the market of these securities, where you had Gibbs' statement late on Friday, which led to a spike in the price of these assets, and then a decline this week when it becomes obvious that at least Citi is going to be, in part, acquired.
WILLIAMS: It seems to me you have a situation where you should test the strength of the banks. But the problem the administration is having is they are looking out, and they are saying what happens if unemployment continues to go up? What happens if we continue to have dire economic forecasts? Can the banks withstand it?
And none of these banks, as it turns out — Charles is right — the small banks might be up to it, but not the big banks.
So if you nationalize it, what does it mean politically? One last point — if it means politically that you are going to have Republicans say "You guys nationalized the banks. You're a bunch of socialists," that's why Robert Gibbs comes out and says, "No, we're for private markets."
BAIER: We'll leave it there. Quickly, on a day that the president's review of Guantanamo Bay detainees resulted in one suspect going home, the former commander of the USS Cole chastises Mr. Obama's policy.
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KIRK LIPPOLD, FORMER COMMANDER OF USS COLE: He needs to follow what he said he was going to do. The rolling process of reviewing detainee files hadn't even kicked off, and we're already releasing them.
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BAIER: We'll discuss where we are on the Gitmo changes when we return.
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WHITE HOUSE PRESS SECRETARY ROBERT GIBBS: What this administration is working to do, per the executive order, is to come up with a plan that ensures our security and does so in a way that meets the test of our values and protecting the men and women that keep this country free and safe. I don't think you have to do all of that through a photo op.
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BAIER: What's he talking about there? Attorney General Eric Holder visited the detention facility at Guantanamo Bay today, although we don't know exactly what happened on that trip, because no reporters were allowed to follow the attorney general. There we have no pictures or info about that trip.
It happens on the same day that the transfer of a former Guantanamo Bay detainee completed, now released in Britain, Binyam Mohamed. And, obviously, this is controversial for some military families who believe he should still be behind bars.
We're back with the panel — Charles?
KRAUTHAMMER: This guy Binyam is a piece of work. He's a Somali. He grew up in Britain. He ends up captured in Afghanistan.
His story is that he became a drug addict in Britain, and went over to Afghanistan to get off the drugs. Now, as we say in medicine, this is a reportable case. He would be the only person on the planet who goes to the country that is the greatest producer of opium on the planet to get off drugs.
Then he says he trained in an Al Qaeda camps, but only to fight in Chechnya. Well, if he can produce a diploma from terror university with a masters in advanced terrorism that is stamped for use only in Russia, I might give him a pass. But I don't believe a word of it.
Look, he made his choice. He joined Al Qaeda, which in the '90s had declared war on the United States and on all Americans. He knew what he was doing.
In the past, when you captured enemy combatants, he stays in custody until the war is over. So people argue the war will never end. Well, whose fault is that? Al Qaeda can declare an end any day it wants. I wouldn't ask for a surrender on the Missouri. A statement on the Internet will do.
But we aren't the ones responsible for an endless war. He chose his side. He stays in detention as the prisoners, the Germans the Italians who were held in the U.S. many years in World War II.
BAIER: The authorities in Britain are saying that he will be under surveillance — Juan?
WILLIAMS: I'm puzzled by this. I don't understand — the British apparently believe, contrary to Charles, that this man deserves his freedom. And, to my mind, he should at least be tried. I don't see why the British wouldn't take him and test his story.
But, apparently, they're releasing him. He's not going to a British jail. He's walking the streets. He will be followed according to my friend, Mr. Kristol, but that doesn't make me comfortable. Let me just say that. Nonetheless, this is a day when, according to government officials who looked at Guantanamo Bay, that, in fact, the Geneva Conventions are being observed at Guantanamo Bay.
They said that the detainees should have more socialization, or something minor like, but they are saying that basically the prison holds to the standards of the Geneva Convention. Well, if that's the case then, and you're going to release about 60 percent of them, what are we going to do — the hard question then becomes, with those who remain, if you're going to remove them, if you're going to close the prison, it seems to me at this point you're saying maybe we are a little bit premature in shutting the doors of this prison.
Unless it is just a public relations problem, and I think that's just what the Obama administration is saying.
KRISTOL: It would have been nice if they had waited for that review, that impartial review, that did say that Guantanamo is a humane place and that it abides by Geneva Convention standards, even though these prisoners do not have Geneva Convention rights because they are terrorists, they are enemy combatants.
It would have been nice if maybe they would have waited to announce their policy on Guantanamo until the attorney general visited there. To my knowledge, President Obama has never been to Guantanamo. I assume Eric Holder has never been there.
But they decided to close it, and now they have a huge problem. What are they going to do with these dangerous terrorists? Ninety of them are from Yemen. Yemen has become, unfortunately, a big Al Qaeda central. If you send them back, there they will be back plotting against the U.S.
As Juan says, this fellow is in London, and he is a very bad actor.
It was irresponsible for the president to announce on his second day in office that he was going to close Guantanamo, and now they have a very difficult challenge in trying to keep us safe.
BAIER: Quickly — there are 600 prisoners at the Bagram air base in Afghanistan. The Obama administration is now saying that they don't have rights to challenge — their constitutional rights, they don't have any to challenge in U.S. courts, challenge their detention. Is that the next Gitmo, Charles?
KRAUTHAMMER: It has to be. And it makes the Gitmo policy a charade and hypocrisy. The guys in Bagram are in the same status as the ones in Gitmo and they don't have the right to contest habeas corpus. The Gitmo detainees shouldn't either.
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