This is a rush transcript from "The Five," August 8, 2011. This copy may not be in its final form and may be updated.
DANA PERINO, CO-HOST: Welcome back to "The Five."
We are talking about the downgrade. And earlier today, we heard the Standard & Poor's also downgraded the credit ratings of Fannie Mae and Freddie Mac. To some people, that might be like a foreign language.
Eric, what does it mean to folks out there?
ERIC BOLLING, CO-HOST: Very quickly, it means another notch on the belt of the Obamanomics failing.
Here's what happened, it's another downgrade. How it affects everyone watching here right now. It's going to make it that much more difficult for real estate market to come back.
Here's another downgrade basically telling everyone the real estate market isn't coming back anytime soon, which means the construction jobs aren't coming back anytime soon, which means unemployment is likely to stay elevated for a very long time.
ANDREW NAPOLITANO, CO-HOST: Fannie and Freddie are government-owned enterprises that basically say to banks, we'll buy the bad mortgages from you so that people can own their homes. If the government puts the cash in there, then the government's same bad credit rating should obviously inure to Fannie and Freddie as well. Are they still going to be buying these bad mortgages or are the Feds not going to put money in there?
BOLLING: Here's the -- I'm sorry, Bob. I know you want to jump in.
There's a huge can of worms just you opened up, Judge Napolitano. Look at the states that are rated AAA. I think there's 10 or 12 states that are rated AAA, with literally tens of thousands of investors in those states.
If the U.S. government isn't AAA anymore, how in the world can these states be rated AAA, if they get 20 percent, 30 percent, 40 percent of the money --
NAPOLITANO: From the Feds.
KIMBERLY GUILFOYLE, CO-HOST: They can't.
BOB BECKEL, CO-HOST: If you don't mind me saying, that there is one terrible credit agency that has downgraded us and the rest of them have not. So, let's not say that we're downgraded.
And the other thing about Freddie and Fannie, it is true that they don't own outright -- you know, it's a stock held, publicly held company but they back up loans of Fannie and Freddie. And Fannie frankly could start making loans that they shouldn't have made, trillions of dollars worth that caused a lot of housing problems.
PERINO: And, Bob, part of that was because was Standard & Poor's kept giving them the go ahead.
BECKEL: That's exactly right. That's exactly right, which adds to my conspiracy theory.
But here's the reality of it -- for people who own, for Freddie and Fannie now, because interest rate on the treasury notes are not going to go up, because of this bogus downgrade, then that means Fannie and Freddie will be able to continue to loan money.
Now, the only question I have here: is there a moment in your life, Eric, is there a moment in your life where you don't think a nightmare about Barack Obama? Is there?
BOLLING: Yes, 2012, November 1st, when he's no longer President. I'll get over it.
BOLLING: Get over it.
BECKEL: That's when the Bachmann administration is taking over?
BOLLING: It could be.
PERINO: Moms and dads out there, what do you think it means?
GUILFOYLE: They are worried about this. Who wouldn't be? And I think the stock market, what we saw today -- the drop-off -- before and after President Obama spoke is a real indication of the concern here.
You had Fannie and Freddie that guarantee, what, how much? They guarantee $5 trillion in home loans in the United States. That is a real impact.
And you can be dismissive about S&P, but when you hear Moody's making statement saying, yes, they did reaffirm on August 2nd, our AAA rating, but they have not guaranteed it, it's still subject to change. And they said, the spending cuts must happen. We must deal seriously with the $4.5 trillion deficit. We haven't done it yet.
BECKEL: It is true that they do back up the $5 trillion. But those are now set mortgages. It's mortgages down the road, you have to worry about it, if you're holding, if you want to get Freddie and Fannie to back you up.
BECKEL: But one of the things that even in the fraudulent Standard & Poor's wanted was to see a big deal, a $4.5 trillion deficit deal. And I keep coming back to this which you conveniently forget, and that is that Barack Obama put real cuts on the table with John Boehner in entitlement programs, to the point where the left was screaming top of the hill.
And Boehner agreed to do some tax increases. He went back to his caucus. The Tea Party wouldn't let him do it.
And I'm not sure that Obama could have gotten it but at least the two of them tried. And nobody else tried. Except for your guy, Paul, what's his name again?
BOLLING: Paul Ryan.
BECKEL: Paul Ryan, yes.
PERINO: I want to ask the judge because we have a sound bite from Timothy Geithner.
And one of the questions has been today whether or not he should resign. Let's listen to what he said in response to that.
(BEGIN VIDEO CLIP)
TIMOTHY GEITHNER, TREASURY SECRETARY: I believe in this president, John. I believe what he's trying to do for the country. I love my work.
And I think if the president asks you to serve, you have to do it.
And we have men and women dying to protect the country in Afghanistan.
We have unemployment above 9 percent, still trying to heal the scars of this crisis. We have a lot of work to do.
JOHN HARWOOD, CNBC CHIEF WASHINGTON CORRESPONDENT: Do you feel that you or the administration's policies are in any way responsible for this downgrade?
GEITHNER: Oh, absolutely not. You have seen the president work incredibly hard and make really amazing progress trying to heal the damage caused by this terrible crisis.
(END VIDEO CLIP)
PERINO: So, what else is he supposed to say? I mean, he's in a difficult position. And I am not a person who jumps on the bandwagon calling for somebody to resign because I think presidents get to make a decision.
But what do you think?
NAPOLITANO: I think he should resign for two reasons, and one might actually appeal to Bob. I think it would be politically good for the president to get him out of his administration. I think, politically, he's a disaster. He's an inadequate cheerleader.
I also think he has absolutely no respect amongst the banking community and the business community and Wall Street community in the United States of America. And for that reason, he can't effectively be Secretary of the Treasury
BECKEL: I'll tell you, Judge, I don't think -- I can't think of another treasury secretary who has gone through more difficult times than this guy has and I think done a remarkably good job given the cards that were dealt him.
If you don't agree, whether it would help the president politically or not, I don't believe it will.
NAPOLITANO: Wouldn't it?
GUILFOYLE: Oh, my goodness.
BECKEL: Well, I just don't think treasury secretaries do a whole lot for you politically or otherwise.
PERINO: You don't think Hank Paulson would fall into that category?
BECKEL: I think Hank Paulson was -- I mean, look, Hank Paulson had his problems, too, right? But if Bush got rid of him -- but I mean, I don't think treasury secretaries matter. This is much bigger than a treasury secretary and is much bigger than one White House, I might add.
I couldn't think of any set of policies that you could have done that would have gotten this economy back on its feet and roaring in two years.
BOLLING: It may be bigger than one White House, but it's certainly not bigger than one White House and one Senate because if it was just -- you know, if the Senate was Republican, you would have had the spending cuts and we wouldn't have been downgraded.
PERINO: Well, I don't know if that is necessarily true because you had Republicans in charge for eight years, and when President Bush tried to bring up Social Security reform, they all went running for the hill.
NAPOLITANO: You think that this guy started out with, you know, everything against him when he admitted he hadn't paid his taxes on time. And he was using --
NAPOLITANO: A lot of good people have problem with taxes, but he's the Secretary of the Treasury.
BECKEL: I've had a few of my own, in more ways than one.
PERINO: All right. We're going to have to move on.
BECKEL: I had illegal maids. I'll admit that. Many of them.
PERINO: If we keep going, Bob is going to admit more things. That's why we're going to take a break. More on "The Five," next.
GUILFOYLE: He will be indicted.
BECKEL: Past the statue of limitations I think. I hope.
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