This is a rush transcript from "The Journal Editorial Report," March 28, 2009. This copy may not be in its final form and may be updated.

PAUL GIGOT, FOX HOST: Up next on "The Journal Editorial Report," Tim Geithner's new bank plan. He needs private partners to make it work. But will Washington's assault on Wall Street make bankers think twice before getting on board?

And the Obama agenda — health care, taxes, cap and trade, union organizing. How much of this is running into trouble?

Plus, conservative Catholics get their Irish up over Notre Dame's choice of a graduation speaker.

"The Journal Editorial Report" begins right now.

Welcome to "The Journal Editorial Report." I'm Paul Gigot.

Treasury Secretary Tim Geithner unveiled his long-awaited plan to buy up bad bank assets this week. The program would create a public/private partnership to take up to $1 trillion of toxic paper off the books in the hopes of unfreezing credit markets. But after weeks of Wall Street bashing in Washington, will potential investors think twice before getting on board?

Joining the panel this week, Wall Street Journal columnists Mary Anastasia O'Grady, Holman Jenkins and Kimberly Strassel.

Holman, President Obama invited the biggest bankers to the White House on Friday hoping to sweet talk them into cooperating. But after all the AIG fiasco of the last couple weeks, can they win them back?

HOLMAN JENKINS, COLUMNIST: I'm not sure sweet talk is all that they got. I think they probably were reminded who is the boss, too. After all, he stands on top of the regulatory apparatus that decides whether these banks are solvent or not. So he has a lot of pressure points on them to get them to help him make this plan a success, which is at least get some transactions going, get these assets off their balance sheets.

GIGOT: So he can say we're not here to punish you, but in the background is we may have an offer you can't refuse?

JENKINS: Absolutely. I think also he's setting the stage down the road, if this doesn't work out, if the economy doesn't heal, the bankers go back to being the enemy pretty quickly.

GIGOT: Mary, can the Geithner plan work? The stock markets really liked it or seemed to.

MARY ANASTASIA O'GRADY, COLUMNIST: I think the stock market might have been up for other reasons as well. There was good February housing data out. I think there was some short-covering that went on. And I think that people were also happy that Obama did a climb-down from his angry rhetoric against the banks. But I think this can get the private investors buying these assets.

GIGOT: At least bidding on them?

O'GRADY: At least bidding on it. He's sweetened the deal. The hedge fund managers say the assets are worth "X" and the banks say they're worth something much more. There's a big gap. And we have to discover what the price is. Basically, what the government is going in and doing is saying to the hedge fund managers, here's a bunch of money for you to bid up to the price closer to what the banks say they're worth.

GIGOT: This is a very good deal if you want to bid. They have guaranteed money from the FDIC, leveraged at 6 to 1. You put up a buck, the Fed puts up a buck. You have some down side risk but very small.

JENKINS: All you can lose is a buck. But even if the assets go up just a little bit, you can double, triple, quadruple your money quickly.

The question is can you keep that money. At the end of the day, if Congress says, look at all this money these people made, the taxpayers got shafted. There are all kinds of clawbacks. We can hit these people with taxes. We can find ways to punish them. That's what makes people reluctant to go into the deal in the first place, sweet as it is.

GIGOT: So the bid prices...

KIM STRASSEL, COLUMNIST: We're already seeing some that — By sweetening the deal, the point is, if it works, these guys are going to make a killing. We already have people saying this is robbery of the American taxpayer. They're putting up all the risk but the private sector is going to financially benefit. That's also going to make some of these guys wary to participate.

O'GRADY: The point is that the banks need to be recapitalized. There's no question about that. And this is kind of, I'm sorry, an easy way of doing it.

GIGOT: It's a back-door subsidy.

O'GRADY: There is one good thing about it and that is that the government doesn't get control of the assets. and that would probably be a disaster. But the fact of the matter is that we, the taxpayers, own this mess. There's no way that these bad loans, if they don't recover, are going to be paid for by anybody but us. And the government has to recapitalize. And even after this whole exercise, they may end up having to pay it back.

GIGOT: If it doesn't work.

Kim, isn't one of the calculations here by Geithner and the Obama White House that they just couldn't go back to Congress directly and ask for another $300 billion or $500 billion or whatever it would take; and that they had therefore to do this leveraging of the Federal Reserve balance sheet and the FDIC and kind of do this backdoor, sneaky subsidy of the banking system.

STRASSEL: That's right. Officially, only a small portion of the money from this is going to actually come out of the TARP funds. That's because they've only got a small bit of the TARP funds left. The rest, as you say, will be re-leverage, up to the FDIC and of the Fed, and they're going to hope that things begin to work. And if there is some proof this can begin to work, then Congress might be more in the mood to give them the money that they need.

O'GRADY: The other think I think you need to keep in mind is that when it doesn't work, inflation is always — printing the money, is always the last resort. And I must say that's what's going to end up happening.

GIGOT: Holman, the bid side is a bit, I think, with this plan. But what about the other (ph) side? What I mean by that is what about the banks themselves who own the toxic assets now. Let's say you're Citigroup and you have $300 billion of federal guarantees against any losses on those assets. What's your incentive to sell those assets if you have to take a loss and hurt your shareholders?

JENKINS: The regulators can make it worth your while to do that. The incentive right now would be to hold on to those things. They're getting very cheap funding because they have all these government guarantees, cheap money from the public. They're earning good spread on a lot of this stuff. A lot is performing. The interest and payments are continuing to come in. It's just the market doesn't want to hold this stuff. The banks might be better off holding it themselves. I think maybe that's a better solution.

GIGOT: Geithner says they're going to sell. There's going to be some political leverage.

JENKINS: They need to get some transactions done so Geithner can claim he had success. The whole idea that if you get Citigroup and the Bank of America healthy, the economy gets healthy, that may not be true anymore. They may be barking up the wrong tree.

GIGOT: OK, Holman.

When we come back, from Card Check to Cap and Trade, is the Obama agenda in trouble?

(COMMERCIAL BREAK)

(FOX NEWS BREAK)

GIGOT: President Obama was in full campaign mode this week, taking his push for a $3.6 trillion budget directly to the American people, first in a prime time news conference and then a town hall meeting. But centrists in his own party are beginning to question whether he can do it all, stimulate the economy, overhaul the banking system and move ahead with a very ambitious domestic agenda. So will something have to give?

Kim Strassel, big news this week, Arlene Specter, Republican from Pennsylvania, said he's is going to switch on this issue of union organizing Card Check, which will have a practical effect of eliminating secret ballots in union organizing work sites. Big news, because that could give the Republicans 41 votes to stop a filibuster. Does this mean that Card Check is dead?

STRASSEL: Well, I think at the moment it is, at least in its current form and in terms of the bill that had been introduced. Because Mr. Specter does give the Republicans the 41st vote. This is a big blow to the Democrats and the Obama administration.

The union spent hundreds of millions of dollars to get them the majorities in Congress and to get President Obama in the White House. And their one request was give us Card Check. Now what you're beginning to hear is talk of compromise. But again, the business community and Republicans are reluctant to have any form of this bill.

GIGOT: The unions aren't going to give up. They know this is their big chance. They've been waiting 20, 30, 40 years for this. They're probably never going to have this many Democratic Senators again. What's their next strategy, what's the fallback?

STRASSEL: The next strategy is to put forward compromises, which they hope they can encourage not just people like Arlen Specter but asking a couple of nervous swing states, people like Mary Landrieu in Louisiana, or Lance Lincoln in Arkansas, to come forward. To do that, they've got to turn some of the business community to support one of these compromises.

(CROSSTALK)

GIGOT: But when you say compromise, Kim, it sounds like oh, it's sweet reason. Is there really something that the business community can give on as a matter of principle here, or do they just have to hold fast and say, look, this is a bad idea and we don't want to go the way of France?

STRASSEL: No, they've got to hold fast. So far, that has been their view. Any compromise fundamentally involves, as we said, eliminating the secret ballot in some regards and forcing compulsory arbitration on companies, both things which are an anathema to the business community. So far, no compromise has made them turn their heads. That's what they're going to have to keep doing going forward.

GIGOT: So this is not over is what you're saying and this is keep being a union priority?

STRASSEL: This will be big news the rest of this year, all the way to next election.

GIGOT: All right.

Mary, let's talk about the budget. The Congressional Budget Office, run by Democrats, said the deficit will be $2.3 trillion more than the White House predicted over the next ten years. That's got a lot of Democrats stunned on Capitol Hill. What's going on with the Obama budget?

O'GRADY: I think it's in a little bit of trouble. And to borrow a term from a previous president, it's because Obama's using some fuzzy math here. When this is revealed, people have gotten very uncomfortable.

First of all, he's bragging about being able to cut the deficit in half in the next four years. The deficit in 2008 was $459 billion. The year before that it was half of that. So, you know, if you go from $1.2 trillion to $650 billion in the next four years, OK, maybe you're cutting from a really bad year, 2009, but you're not really displaying any fiscal conservatism.

On top of that, he has this claim he's going to have a budget that's 3 percent of GDP in four years. And...

GIGOT: You mean growth? The growth rate. The growth rate.

O'GRADY: Sorry. The — the growth of the economy will be — the deficit will be 3 percent of the GDP. And the problem is that he is inflating that denominator by using inflation. And Judy Shelton, who is a very fine economist, writes a lot about monetary policy, has said there's a 30 percent inflation number built into that. That means almost 8 percent inflation per year over the next four years.

GIGOT: Holman, it's interesting. I don't have any doubt the tax increases he's proposing are going to pass because Democrats want the money and they're going to let the Bush tax cuts expire in 2011. But on the spending side, how much restraint are we really going to see in Congress? That's not a body known for restraint.

JENKINS: I'm not sure about the tax cuts if the economy still in the dumper.

GIGOT: The tax increases.

JENKINS: Tax increases? Even on spending, they had this crazy idea coming in that the financial crisis made everything possible — health care, green energy, climate policy. While there's a substantial number of Democrats in the Senate, about a dozen of them, who are already saying whoa to that. Obama is very popular, so they're not going into his face about it. but they are starting to chip away at some of these ideas. Card Check is on hold. Climate change is probably on hold. Other green energy subsidies might go through because there's a lot of lobby groups that really want that stuff.

GIGOT: Free money is easier to pass.

JENKINS: I don't think much is going to be left of the Obama agenda in a year. and then he's going to have to think about what he's really going to do.

GIGOT: What about health care? That seems to be a real priority. He mentioned it at his press conference. He said, I can give up maybe Cap and Trade and energy and do it some other way than in the budget, but on health care, that's a real priority. They're even talking about using this method, procedure which they could just force it through with 50 votes, rather than the 60 that the Senate usually requires for big changes.

JENKINS: Right. They'd force through some money for health care. But what is the plan. There's still a big argument over that. You could get a good majority for health care reform if it was reform that made sense. But they're talking about opening up Medicare to everybody pretty much.

GIGOT: That's what he's proposing. That's exactly what he's proposing.

JENKINS: Yes.

GIGOT: Is the Congress of the United States really going to go along with that, letting you, Holman Jenkins, get a subsidy if you want to from the federal government for health care?

Health care could be doable if the economy is really bad, because the middle class will be panicked. But otherwise, I don't think it's going to works.

(CROSSTALK)

JENKINS: When people are getting jobs again, they're not going to want to see this coming down the pipe.

O'GRADY: There's another problem here which is Kent Conrad in the Senate.

GIGOT: North Dakota Democrat, head of the Budget Committee.

O'GRADY: Right. He has said that the tax cuts, the famous tax cuts for 95 percent of the Americans would be abandoned in the Senate's version of the budget because it's just not affordable. That's also a big loss for Obama.

GIGOT: OK, all right, Mary, thanks.

Still ahead, conservative Catholics are getting their Irish up over Notre Dame's choice for a graduation speaker. Should the university rescind its invitation to President Obama? There's a debate ahead.

(COMMERCIAL BREAK)

GIGOT: Some Catholics and Notre Dame Alumni are upset over the university's decision to have President Barack Obama deliver the commencement address there this month. Almost 200,000 people have signed an online petition launched by a conservative Catholic group calling for Notre Dame to rescind the invitation. The group says the president's views on abortion and embryonic stem cell research directly contradict Roman Catholic teaching.

We're back with Mary Anastasia O'Grady. We're also joined by Phil McGurn, Wall Street Journal columnist and Notre Dame grad; and Naomi Schaefer Riley, who edits the Journal's "Houses of Worship" column.

Bill, you got a few people in the Notre Dame administration upset with your column. Why shouldn't an important university like Notre Dame be able to invite the American president?

BILL MCGURN, COLUMNIST & NOTRE DAME GRAD: I think there's two reasons. One is that abortion is not an issue like other issues. The church considers it an intrinsic evil always and everywhere wrong. And the bishops have asked specifically the Catholic institutions not confuse people by putting people in a position where they honor them.

The second argument that's flows from that is this is not just an invitation. If he were coming to debate this, that's one thing. But you're getting an honorary degree and he's the commencement speaker. So you are — you're giving a moral imprimatur to him. That's one reason he's coming.

GIGOT: But the president of Notre Dame says we want to start a dialogue and this is a way we can engage the president. He's not Catholic himself. But he's not the only politician. There's many Catholic politicians who are pro-choice on abortion.

MCGURN: Right. I think, one, it's not a fact of his dialogue. Presidents don't go to the University of Iowa. They go to...

(LAUGHTER)

GIGOT: They go to speak.

MCGURN: Yea. They go to advance an agenda. And sometimes I think what people have to realize that not inviting someone is more of a statement in engagement in many ways than just going along like everyone else and letting someone come in. I think that's the danger of just letting people think this is just like any other issue.

GIGOT: Naomi, do you agree?

NAOMI SCHAEFER RILEY, HOUSES OF WORSHIP EDITOR: I'm afraid I don't. First of all, I think this horse has already left the barn. I think it's an important distinction Obama is not Catholic. I think a lot of people that have come in the past, people like Mario Cuomo, Francis Kipling, who was ahead of Catholics for Choice, these are people who are Catholics, professing Catholics, and they say — and they are directly contradicting the church. I don't think it's confusing to people. With all due respect to the bishops, I don't think it's confusing to people for a Catholic institution to have a non-Catholic come and say something that might be against what the Catholic Church teaches.

But I'd like to leave that aside for a minute and just say that I think the president represents a lot more than just his abortion policies. I think in many respects, no matter who the president of the United States is, whatever party they're from, they represent a lot more than the sum of their policies on anything. They represent, you know, they save a lot of - - the president and the country that he represents save a lot of lives around the country, around the world, too.

GIGOT: Well, and President Obama did carry the Catholic vote bill in the last election despite his views on abortion and stem cell research.

MCGURN: Yes, he did.

GIGOT: So Naomi's point — address Naomi's point that he represents something broader in the American...

(CROSSTALK)

MCGURN: He may represent something broader. But Notre Dame represents something, too. Notre Dame is founded on the idea that there is truth and we know it. And that stands for something. It's a witness. And it's hard to give this witness.

Abortion is a very unpopular stance to take if you're pro-life. so it's very hard. But that's what a witness is. If a place like Notre Dame doesn't give that witness, there's no reason for it to exist.

And, second, on being non-Catholic, Notre Dame would never invite a segregationist there to give a commencement, no matter how good his other policies were, if he had a great health care policy. You wouldn't see Bull Connor or someone else. There are certain stands you have to take. When you have a person giving that stand that's directly at odds...

GIGOT: Pope Benedict met Nancy Pelosi, a pro-choice Catholic politician. That was a big public relations coup for Nancy Pelosi to be seen there with Pope Benedict...

(CROSSTALK)

RILEY: And you compare that to him meeting Bull Connor? I mean, that's...

MCGURN: Let me just say that I would be for a meeting like that. Nancy Pelosi...

GIGOT: There's dialogue there?

MCGURN: No. Nancy Pelosi did not get a photo op. Nancy Pelosi did not speak to the Vatican. Nancy Pelosi was taken into the back room and, more or less, heard a lecture about the importance of life. If politicians were going to go to Notre Dame for that, I would see it. But that was not — I think people would regard that as a P.R. disaster. She thought she was going to get a photo op.

O'GRADY: I think what people are missing about this, the reason conservative Catholics are upset about it, is because abortion, infanticide and euthanasia were specifically mentioned by Pope John Paul II when he talked about, in the gospel, like when he talked about the culture of death. And this is so central to Catholic teaching.

GIGOT: Bull Connor, briefly, you...

(CROSSTALK)

RILEY: No. I think that most conservative Catholics do have associations with people who take a different position on abortion and they wouldn't have those associations if it were a matter of segregation.

GIGOT: All right, thank you, Naomi.

We have to take one more break. When we come back our "Hits and Misses" of the week.

(COMMERCIAL BREAK)

GIGOT: Winners and losers, picks and pans, "Hits and Misses," it's our way of calling attention to the best and the worst of the week.

Bill, first to you.

MCGURN: I say a hit for Brian Lamb at CSPAN. It's the 30th anniversary. And Brian deserves kudos on two fronts. Not only is he a newsman that sort of revolutionized the way we see Washington, he's an entrepreneur because he started up CSPAN himself when everyone thought it was a ridiculous idea. Long before the web and Google and their affect on the news, by bringing a TV camera to hearings, speeches and meetings, he just revolutionized the way American people could watch the proceedings in Washington.

GIGOT: Mary?

O'GRADY: This is a hit for the Civility Project at the University of Virginia where students are teaming up with Miss Manners to rewrite new rules of manners and behavior based on 110 rules that George Washington used for courtesy and respect for others. I say good going. But the father of our country didn't have to put up with the cell phone. I want to see how they tackle that one.

GIGOT: All right, Naomi?

RILEY: This will be a miss for the Writers Guild of America which told ABC this week that it needs to stop soliciting ideas for its show in the motherhood from regular mothers, because you need to be a professional writer in order to tell funny stories about your kids apparently.

GIGOT: So you have to join the union?

RILEY: That's right.

(LAUGHTER)

GIGOT: OK.

(LAUGHTER)

MCGURN: The mother of all unions.

GIGOT: And CSPAN is not publicly subsidized. It's by the cable industry.

And, remember, if you have your own "Hit or Miss," please send it to us at jer@FOXnews.com.

That's it for this week's edition of "The Journal Editorial Report." Thanks to my panel and to all of you for watching.

I'm Paul Gigot. We hope to see you right here next week.

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