This is a rush transcript from "The Beltway Boys", March 21, 2009, that has been edited for clarity.

FRED BARNES, FOX CO-HOST: Coming up on "The Beltway Boys," outrage over AIG bonuses threatens President Obama's agenda and his treasury secretary's job.

MORT KONDRACKE, FOX CO-HOST: We'll take a look at who else may pay a political price over the bonus flap, and if future bailouts are in trouble.

BARNES: And amid the political fire storm, President Obama takes time to promote his NCAA bracket picks, and go on Leno! What's up with that?

KONDRACKE: Plus, six years after the start of the Iraq war, was George Bush right?

BARNES: All that coming up on "The Beltway Boys" right now!

I'm Fred Barnes.

KONDRACKE: And I'm Mort Kondracke. We're "The Beltway Boys."

BARNES: The hot story tonight, Mort, is total screw up. I'm afraid that President Obama, and his administration, and this huge flap over the bonuses for AIG officials, AIG — the company's gotten $170 billion in bailouts from the government. Mort, you may not believe this, but I actually hope Barack Obama succeeds as president, particularly in reviving our economy. I think he has the wrong policies. I don't think they'll work. But if I'm wrong and he's right and it revives the economy, great for him. And, also, popularity will skyrocket. Now, but the way he has handled this whole flap over the AIG bonuses is not helping.

And I want to make three points. The first is this, and that is that the Obama administration has completely flip-flopped on the whole AIG business which has caused a huge problem. They've known about these bonuses for weeks, maybe months. And so when the story came out on Sunday, and then Larry Summers, the economic adviser was on television saying, look, the bonuses are contractual, we can't aggregate contracts, that's it. The next day, President Obama steps forward and says we have to get those bonuses back. That led to the fire storm which ultimately led to the House of Representatives passing, two days ago, that really horrible punitive legislation trying to tax these bonuses at 90 percent. I mean, that's horrible.

Second, Tim Geithner is simply not up to the job, Mort, as treasury secretary. He's lost the confidence of Congress. He's lost the confidence of financial markets. He's lost the confidence of me and probably you, too. And, you know, look, he said he learned about these — about these bonuses a week ago Tuesday, March 10, and then told Obama two days later when, in fact, we know he'd heard about them, been asked about them in congressional testimony. Democrats like crazy were complaining to Treasury about them. You had Senator Menendez, you had Senator Ron Wyden, you had — it's a long list. I'm forgetting some of the names, but I could go on. And yet, the president now seems to think that Geithner is the greatest treasury secretary since Alexander Hamilton.

In response to all this, here's what the president said, watch — about Geithner.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Nobody's working harder than this guy. You know, he is making all the right moves in terms of playing a bad hand. And what we need to be doing is making sure we are providing him the support that he needs.

(END VIDEO CLIP)

BARNES: Please, please!

Anyway, lastly, I'm going to speed up here. and I think you'll agree with this one. Opposition to bank bailouts, because of the way this whole flap over bonuses has been handled, this opposition for bailouts has grown and for the foreseeable future it's politically impossible to get them. It's as simple as that.

KONDRACKE: First, I'm glad to hear that you are wishing the president well and you hope he succeeds. Somehow, I do not remember that when George Bush was losing the Iraq war that you ever said total screw up about him or said that Don Rumsfeld, who insisted on not sending in enough troops, was not up to the job. But we'll let that pass for a moment.

Look, you're right that the AIG flap does endanger the entire idea of how to save the banks. You know, it's going to be politically impossible and Obama's going to have to strain to try to get any new bailouts, if that's the way he wants to handle this.

My three points would be, first, what we saw last week was total hysteria which does nobody any credit.

And except for this one person, Darrell Issa from California, who had this to say about it. Watch.

(BEGIN VIDEO CLIP)

REP. DARRELL ISSA, R-CALIF.: We are rushing to be populists as we speak. That is the wrong thing for us to do. And shame on us for doing it. This bill should not be before us today just because it is popular on talk radio, on both sides of the aisle.

(END VIDEO CLIP)

KONDRACKE: On both sides of the aisle. This was a bipartisan frenzy that should have been the subject of hearings, of rational discussion.

Originally, these bonuses, retention bonuses were instituted because management and the Treasury and Hank Paulson — this was way back in the Bush administration — thought that you had to retain these people in this one division of AIG in order to unravel all the damage that had been done. And the people that actually did the damage had long since taken off to the high hills. So I don't know whether they were necessary to keep them or not. But Congress didn't care. It just went off on this frenzy.

Secondly, Tim Geithner, he's home alone at the Treasury Department practically. Not a single other Senate-confirmable official is in place at the Treasury Department. That's partly Obama's fault because he's had these complicated ethical standards that he's requiring people to meet. And people are turning down jobs at the Treasury Department. But I agree that he is on thin ice. He's about one mistake away from being gone.

Thirdly, look, Obama is trying to do too much. His job, his number one job is to save the financial system. Everything else will be useless to do if he doesn't get that done. But he's trying all these kinds of other things. And the fact is that he may have to concentrate on the financial system, because this latest Congressional Budget Office report indicating that we're going to have trillion dollar deficits ten years into the future, is going to get even Democrats to say we cannot afford everything that Obama wants to do.

BARNES: Let me quibble on one point. And I won't even quibble about the vicious personal attack on me. But the frenzy hasn't been entirely bipartisan. The Republicans have been split when they voted in the House. Democrats were all for that punitive tax bill. And, of course, it was Obama who touched off the frenzy.

Look, at least there's one guy in Washington to deals with the economy who's actually doing something and concentrating on it. Ben Bernanke of the Fed, buying up toxic securities, putting money in the economy. It may cause inflation later, but it's certainly going to help now.

KONDRACKE: Fred, you are a small "R" Republican. I'm a small "D" Democrat. Doesn't it offend you we have this unelected money czar making these decisions how the economy's going to go?

BARNES: Yes, it does offend me. But better someone than no one.

KONDRACKE: Absolutely. Given the way the elected officials have been acting lately, thank god for Bernanke.

Coming up, President Bush passes up a chance to bash President Obama but not Dick Cheney. And is President Obama having too much fun these days? We'll debate that next.

(COMMERCIAL BREAK)

(FOX NEWS BREAK)

BARNES: Welcome back to "The Beltway Boys." It's the time you've all been waiting for.

I know you've been waiting for, Mort, to get back. and he's going to explain later where he's been for the last few weeks.

It's "Up and Down" time.

Down, President Obama. His yucking it up on Leno and going to ESPN to show off his NCAA basketball bracket picks is raising eyebrows.

Even famed Duke Coach Mike Krzyzewski said the president should keep his eye on the ball: "Somebody said that we're not in President Obama's Final four. And as much as I respect what he's doing, really, the economy is something that he should focus on, probably m ore than the brackets."

Mort?

KONDRACKE: Obama's being a regular guy. Everybody's filling out brackets. You're filling out brackets. I am, too. This is...

BARNES: But, Mort, that wasn't exactly a fireside chat.

KONDRACKE: I know. But George Bush used to welcome Super Bowl winners and stuff like that to the White House. Even in the depths of the Iraq War.

BARNES: But we all do that.

KONDRACKE: OK, this is part of being president? And what I read about what Coach K said was that he was laughing when he said it. and he also said, you know, I love the guy. I want him to do well. And it could be that, you know, Obama's challenge to Duke will send it into the final four, maybe into the NCAA championship.

BARNES: I think Duke is in my final four. I hate Duke. But he's a great coach and they have a great team.

(CROSSTALK)

BARNES: Look, everybody hates Duke.

KONDRACKE: I don't hate Duke.

BARNES: I know. Your wife went to Duke. But mine didn't.

(LAUGHTER)

Look, I think Coach K meant exactly what he said. And what in the world was Obama — it's fine to do the brackets. Does he have to do them on television? There's a certain...

KONDRACKE: He's president.

BARNES: That's vanity, Mort that he's going on doing that.

KONDRACKE: Oh.

BARNES: What about Leno? There's a big crisis in Washington and he's going up to California to be on Leno and have a town hall and all that stuff. Please, Mort, that's not what you do.

Look, I was hoping you would be one of those who would join with me and tell the president, look, knock that stuff off. Concentrate on the economy, which is what you said you wanted him to do.

He joked on Leno, I think unfortunately, when he likened his bad bowling to be in the Special Olympics. I'm not somebody part of the language police, but that was unfortunate.

KONDRACKE: I agree with that.

Down, Democratic Senator Chris Dodd. He has landed himself smack dab into the center of the country's banking crisis after initially saying he had nothing to do with the loophole allowing big bonuses to AIG. Then he made a complete 180.

Watch this.

(BEGIN VIDEO CLIP)

SEN. CHRIS DODD, D-CONN.: The language that I wrote on executive compensation had no dates and the like at all. I can tell you this much. When my language left the Senate, it did not include it. When it came back, it did.

As many know, the administration, among others, was not happy with the language. They wanted modifications to it. They came to us, our staff, and asked for changes. And the changes at the time did not seem that obnoxious or onerous. None of us — I didn't have any idea about AIG.

(END VIDEO CLIP)

BARNES: Mort, when do you think he changed his tune from, "I didn't have anything to do with it," then "I had a lot to do with it"? I think he was going to be outed by senators on that conference committee who didn't want to take the blame for that legislation protecting AIG and other bonuses of companies of that gotten bailout money.

Look, Dodd is in terrible political trouble really for the first time. I mean, the newspapers in Connecticut, which have been pretty kind to him over the years, now they are really piling on as that great — you know the way the media works. The one printable that the media has is kick them when they're down. So they're kicking Dodd. Remember the sweetheart deal he had to get a mortgage from Countrywide and so on? It's not surprising that he is facing a tough reelection fight even before the AIG bonus story broke. A Quinnipiac poll taken last week shows him sliding behind like Republican challenger Congressman Rod Simmons. I was surprised.

KONDRACKE: Look, the worst thing you can do is dissemble and get caught dissembling, and that's what he's been doing. And I agree with you. I think he got hornswaggled on this whole thing. At first, he didn't realize how bad this thing was going to appear. Suddenly he realized it, tried to duck away from it and then got caught.

But the fundamental fact is what he did he initially did at the request of the Treasury Department. Why? Because Treasury believed that it was necessary to give these bonuses to them and that they were contractual items and Dodd went along with that.

The question is, were they necessary? Were they contractual or not? Instead of having this wild frenzy, we should get to the bottom of that question.

BARNES: I like the frenzy. I'm kidding. I'm kidding.

Coming up, Chief of Staff Rahm Emanuel continues to ruffle feathers. And six years after the start of the Iraq war, will history vindicate President Bush? We'll weigh in on that next.

(COMMERCIAL BREAK)

KONDRACKE: Welcome back to "The Beltway Boys." We're continuing with the "Ups and Downs."

Up, George W. Bush, a name from the past. The former president chose not to take shots at President Obama in his first post-White House speech, saying that, "the current president deserves his silence," unquote.

BARNES: I'm going to congratulate getting those words out of your mouth. "Up, George W. Bush" — that was very good.

(LAUGHTER)

KONDRACKE: We gave Bush all kinds of ups.

Look, Bush is behaving in the dignified manner that you would expect of a former president of the United States. Not beating up on his successor and so on and letting him succeed and fail or fail on his own.

That's in quite stark contrast to Vice President Dick Cheney, who is out there. You can barely bat him away with a stick. He's giving interviewing to everybody, CNN and FOX and everybody else. And what is he doing? He's finding every occasion that he can to bash Obama. It's very undignified, and he should cut it out.

The latest thing he said is Obama is, "Making sine choices that, in fact, in my mind, will raise the risk to the American people of another attack."

Now, I don't think that's constructive. I think it's just meant to beat up on Obama.

BARNES: It was. But, look, I don't think the tradition of a former president not criticizing his successors applies to vice presidents. I've never heard that anyway. And good for President Bush and his father not criticizing their successor, something that obviously President Carter has violated, and Bill Clinton has occasionally, but not that often.

Look, it's great to see Bush on the verge of actually getting some credit — may not happen for a few years — for his Iraq intervention, which worked, created a democracy.

There's one group, I haven't heard of until recently, is giving Bush credit and that's the Iraqi people. Look, at recent poll of over 2,000 Iraqi shows 46 percent say they feel secure where they live, which is in Iraq. Last March, only 20 percent could say that. Pretty impressive, huh? I thought so.

Now, Rahm Emanuel. He's brought his tough hyper-partisan Chicago attitude to the White House as chief of staff, a position historically that includes overseeing the executive branch staff, negotiating with the opposition party, but rarely, if ever, Mort, attacking partisan opponents politically.

Look, Rahm is an enormously talented guy politically. He practically created the Democratic majority in the House of Representatives. He's no Jim Baker, no Josh Bolten. Those were very talented White House chiefs of staff who recognized how special their job was. And they didn't go around criticizing members of the other party because they have to negotiate, that represent the president. They have to negotiate with members of the opposition party.

Republicans in Congress, when they call the White House, they call Rahm Emanuel. They don't call the president. And I think he's threatening that with the stuff he said about Republicans, they're just followers of Rush Limbaugh. He's their brains. He's their voice and so on, and suggesting that Republicans, as well, just want Obama to fail in his entire presidency. And they don't.

KONDRACKE: He did bring up in one interview — and he brought it up. He is part of the planning of this Republican Party equals Rush Limbaugh. No question about it. But you get these republicans — just on the merits. You get these Republican leadership e-mails every day, thousands of them. They come bucketing in.

BARNES: Sure. They're not chiefs of staff.

KONDRACKE: I don't care. 99 percent of them are negative, are saying something negative about Obama. There are Republicans who have constructive ideas and Obama ought to be listening to them. I mean Lamar Alexander is proposing nuclear power as an energy solution and Paul Ryan is suggesting insurance guarantees instead of bailouts and stuff like that.

BARNES: Both leaders, by the way. Both leaders.

KONDRACKE: But the main message coming out of the Republican Party is exactly the Rush Limbaugh message. N-O.

BARNES: Because they won't listen to any of the alternatives, of which Paul Ryan — and you've talked to. He's full of them.

KONDRACKE: I agree.

BARNES: And he's the policy guru of the party.

KONDRACKE: I agree. And Obama ought to get together with him.

Up, the Mexican President Filipe Calderon. He is confronting deadly drug cartels head on, even capturing the son of the country's most notorious drug lord this week. The U.S. is concerned about increasing violence along the border but Calderon insists there is a solution found to be working together. Working together means doing everything to help this heroic Mexican president out. It does not include having a trade war with Mexico.

So what did the Democratic Congress do? It put in the stimulus package, at the behest of the Teamsters Union, a ban on Mexican trucks, only 95 of them coming in the United States, which the Mexicans are going to respond by raising tariffs. And we do not need that...

BARNES: They have already.

KONDRACKE: We need good relations with Mexico. And we need to have the Mexican economy prosper in order for the drug lords to be brought under control.

BARNES: We need President Obama, Secretary of State Hillary Clinton both to sound off on this. And I suspect they will.

KONDRACKE: They're going to visit soon.

BARNES: 95 trucks. Can you imagine that? It's a small deal for us. It's a huge deal for Mexico. Calderon, you're just so right about him.

We've complained earlier, Americans have, about how inadequately earlier Mexican presidents have fought the drug cartel. And this guy has taken them on and the drug cartel is fighting back furiously, as you might expect. And so good for him. So President Obama, I'm glad he's going there, and Hillary Clinton as well. They need to speak out very forcefully and back him up.

KONDRACKE: And back NAFTA.

BARNES: And back NAFTA, and NAFTA as well. I'm still waiting for a time, Mort, when President Obama will step forward when there is some — something that the organized labor wants, that's protectionist or anything else, and he says no. I'm waiting for that happen.

KONDRACKE: What I want to hear is merit pay, merit pay for teachers.

BARNES: I'm for that too.

KONDRACKE: Right.

BARNES: Don't go anywhere. "The Buzz" is coming up next.

(COMMERCIAL BREAK)

BARNES: What's "The Buzz," Mort?

KONDRACKE: Well, in response to popular demand about where has Mort been, I thought I'd answer. I was playing Mort of Arabia.

(LAUGHTER)

Actually, this was in Dubai. This was a bucket-less trip. You know, Marrakesh, Luxor, Dubai, Jaipour in India, the Taj Mahal, Petra, great place, so my bucket list is also complete. Next stop, Saint Andrews and Normandy.

BARNES: I have been to Normandy, Mort. There was great demand. You know, where in the heck is Mort. I wasn't even sure from day to day.

Mort, you know what is very telling? I would put it this way. Even Congresswoman Maxine Waters wants to know the sequence of events and who was responsible for bailing out — you know, getting in the stimulus bill that legislation that protected the bonus for all those AIG officials. Look, when Maxine Waters is implicitly criticizing the White House and the Treasury Department, that is trouble. And I think they're going to have to find out and reveal to us when did they first learn about the bailout and when did Geithner learn, when did the president learn. And we need to know that soon.

KONDRACKE: OK. That's all for "The Beltway Boys" for this week. Join us next week when the boys will be back in town.

Watch "The Beltway Boys" Saturday at 6 p.m. ET and Sunday at 1 and 6 a.m. ET

Content and Programming Copyright 2009 FOX News Network, LLC. ALL RIGHTS RESERVED. Transcription Copyright 2009 CQ Transcriptions, LLC, which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon FOX News Network, LLC'S and CQ Transcriptions, LLC's copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.