The following is a rush transcript of the July 29, 2010, edition of "Special Report With Bret Baier." This copy may not be in its final form and may be updated.


REP. CHARLES RANGEL, D-N.Y.: Sixty years ago, I survived a Chinese attack in North Korea. And as a result I've though, having survived that, I have not had a bad day since. Today I have to reassess that statement. Thank you.


BRET BAIER, ANCHOR: Charlie Rangel today after a bipartisan investigative panel, part of the House Ethics Committee, came out with 13 specific ethics violations against the long-time New York congressman.

They include basic areas, the 13 specific violations -- using official office items to solicit funds and favors for his center in New York; not disclosing income made on a Dominican Republic villa in Punta Canna; using an rent stabilized apartment for politics instead of housing; failing to disclose more than $600,000 on financial forms; failing to declare the rental income from the villa in the Dominican Republic.

So there is word of a possible deal here. Some lawmakers are saying it is too late and we are headed to a trial with the Ethics Committee. There was also talk about what this means for ethics overall in the House today:


HOUSE SPEAKER REP. NANCY PELOSI, D-CALIF.: We will keep our promise to drain the swamp that is Washington D.C., to let sunshine disinfect the Congress.

What we did when we came in was to implement the toughest ethics reform in a generation.

HOUSE MINORITY LEADER JOHN BOEHNER, R-OHIO: Well, the fact is she made that statement over four years ago, and the fact is the swamp has not been drained.


BAIER: So what about all of this? Let's bring in our panel: Bill Kristol, editor of The Weekly Standard; A.B. Stoddard, associate editor of The Hill, and syndicated columnist Charles Krauthammer.

A.B., let's start with you. What is going to happen to Charlie Rangel?

A.B. STODDARD, ASSOCIATE EDITOR, THE HILL: I think the Democrats did hold out hope this whole week, this whole morning and throughout the afternoon there would be a deal -- a deal that would help avert this trial that would be a political circus come September.

But it is not really in Charlie Rangel's interest at this point to strike a deal where it would expose him to more legal liability. I think he's sort of dug in at this point. It doesn't look like he is considering resigning. He has a primary coming up in September and now it looks like a trial. And it looks like they are headed into a six-week recess with this around their necks. It doesn't mean it won't happen or that a deal and a plea won't be struck in the next six weeks.

Congress is going to be recessing in the House tomorrow night or Saturday. The clock is ticking to happen immediately. It just doesn't look at this point like it will, and it looks like he is ready for a fight. He is a very proud man and his party, you will hear, however, obviously now that the charges have been read, much pressure on this party private and public, calls for resignation and talk about the seriousness of the charges.

BAIER: Either way, Charles, this does not play well for Democrats. If he does do a plea deal that's something less than what Republicans feel he should face here, it's not a good thing. And if goes go forward with the trial, it paints a picture headed into the midterms.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: For Democrats it is lose-lose. I think it's worse if you get a trial simply because it becomes a spectacle. It is on television every day. It reminds people. If you have a deal, it is a one-day story or a two-day story. It is an issue that will be raised over and over again, but it will not be a national story every day. We have not had a trial since James Traficant, who was a character, ended up in jail a felon. That was really serious stuff. And I hate to see Rangel in that category.

I think that through his lawyers he seemed to be ready to compromise on what you might call the venial sins, those who come when you become a chairman -- powerful, you get used to the kingly accoutrements of the office and he stepped over the line on perks.

But he seems really resistant to admitting to the misuse of office. There's this one charge that in order to solicit $1 million for the Rangel Center at the City University in New York, he, at least in the charge, he was considering giving a tax break to the individual in the company. Now, that's corruption. And that's what I think he is holding out on because I don't think he ever wants to admit that. That would be a stain on a heroic life and career and I think he will hold out on that and fight.

BAIER: On some of these charges, the House Ethics Committee, Bill, might be the least of his worries if he has the Justice Department looking into some of this stuff.

BILL KRISTOL, EDITOR, THE WEEKLY STANDARD: Look, if he broke the law, he should be charged with tax fraud or with not declaring income, or whatever. I read through this Ethics Committee document and I am not actually overwhelmed by the severity of these charges. I mean, some of it are tax issues which should be litigated in court, presumably -- that's not really for the Ethics Committee to decide.

Some of it is disclosure issues on financial forms. He was clearly not paying close attention or was sloppy. But at the end of the day he is not one of the wealthy members of Congress, and it would not have changed a thing if he disclosed $8,000 of rental income on some property or not.

And then there's the Charles Rangel Center, which is really at the heart of the charges, which is, I guess, part of the City University of New York. He obviously had an interest in getting donors to give money to it, it was honoring him. He did not have any direct financial participation in that that I know of. So it was a little bit of vanity, and obviously if you are a company that has business support, Ways and Means Committee, you might think it is a good idea to give a charitable gift to something named after the chairman of the Ways and Means Committee.

But compared to what happens in Congress all the time, compared to the airports that are named after sitting members of Congress, the post offices, compared to earmarks that are flowing around the Appropriations Committee, I think it is pretty small beer. So I hope he actually fights it and stands up for himself. He deserves his day in court.

I don't think it will be a spectacle. People say it's a spectacle. It will be a boring, legalistic discussion. I don't think it will hurt Democrats. This does presume -- if I could say, honestly, everyone in Washington thinks voters are idiots. They will see some Democrat on trial and they will vote against their Democrat in Ohio or Nevada or Arizona? I don't believe it. There's no -- there's no empirical -- there's zero empirical evidence of this.


BAIER: It does paint a narrative, does it not, of congressmen who have been here for a long time who, perhaps, think they are above the law? Whatever these charges are, that are listed, it paints a bad picture for Democrats headed into the election.

You can't deny that, right?

KRISTOL: It paints a bad picture of congressmen. I don't think it's only of Democrats. There are plenty of Republicans who have been there for a long time.

BAIER: No, I understand that. I don't mean that. But I mean, it's a bad thing because Charlie Rangel is a Democrat.

KRISTOL: I don't know. I don't think voters impute the personal ethical lapses if there were some of one congressman --

BAIER: They did in 2006.

KRISTOL: I don't think so. 2006 was going down the tubes anyway way before Foley.

And this is classic inside the Beltway thing of thinking that one of these little scandals will be on TV for three days and they're going to throw the whole party out. It doesn't really work that way.

BAIER: A fired up Bill Kristol.

STODDARD: I think Bill Kristol is gunning for a trial, and I disagree. I think it will be a spectacle.

But I'm going to agree with Bill on this, that if you query the members of the freshman and sophomore class who are fighting for their lives and holding on to their seats right now by the skin of their teeth, I'll tell you this, they are not hearing from voters about Charlie Rangel. They are hearing about the deficit, the stimulus package, the health care bill and everything else.

I do think it gets them off message to deal with the national media and focus on a trial in September.

KRISTOL: But one footnote to defend myself here --


KRISTOL: Democratic members will be much more hurt by President Obama's stubbornly insisting on a tax increase that is going to damage jobs and the economy than on a Charles Rangel spectacle. This like number eight on the list, and remember there are 28 on the list of Democratic House members' worries, I believe.

BAIER: You have the floor, sir.

KRAUTHAMMER: If Democrats were not worried about the impact of the spectacle and the image, then they would not be lining up to demand his resignation or pressure him.

Secondly, on the substance, I agree on almost all of the charges as being relatively minor, of the venial variety, like misusing the rent-control apartment. Everybody in New York who has one does that.

However, the trading on your office to imply you would change a law or influence the writing of a law in return for $1 million donation, even if that is only for a center and not to put in your pocket, that is corruption and that's why I think Rangel, who is a man of honor, would fight that and would not agree to it in a plea deal.

KRISTOL: But they do not show interestingly any actual provision he put in for anyone. It's sort of -- in principle people could have thought he would put it in a provision. But it strikes me with all the ethical lapses of so many members of Congress, I don't think this is in the top handful.


KRISTOL: I'll be working for Congressman Rangel in September.

BAIER: Congressman Rangel should hire you, he really should.

OK, up next, President Obama on the issue of race as we head into the midterms, and another issue. Stay with us.



PRESIDENT BARACK OBAMA: A lot of people overreacted, including people in my administration. And part of the lesson I want everyone to draw is, let's not assume the worst of other people, but let's assume the best. Let's make sure we get the facts straight before we act.

And when it comes to race, let's acknowledge that of course there are still tensions out there, there are still inequalities out there, there is still discrimination out there. But we have made progress.


BAIER: President Obama on "The View" today. He also told the National Urban League America that the country still needs a deep, reflective conversation about race. That is one of the topics today. We're back with the panel. What about his comments, Bill Kristol?

KRISTOL: I agree with him that we have made progress. The main bad thing that happened is not that a lot of people have reacted, but his secretary of agriculture fired this woman unjustly. That's the main overreaction. And he should take responsibility for that, and then we should move open.


STODDARD: Well, the incident last week with Ms. Sherrod is not go away, and she is taking action, legal action now, and she will stay in the news and it becomes a question for President Obama and the Democrats.

The biggest nightmare in the Charlie Rangel case for Democratic leaders was the prospect that members would begin a stampede of calls for resignation before the charges were read today, which would have prompted the Congressional Black Caucus to accuse the other Democrats of a rush to judgment.

And they fear that the intra-party division as they head into the recess in which coupled with the Sherrod incident, Obama's critics and the Republicans could say -- speak to African-American voters and say, look, look at what happened to Charlie Rangel. They are hanging him out to dry just like they fired Shirley Sherrod without watching the entire video.

This obviously didn't materialize, but it was a real fear for Democrats.

BAIER: Charles, he also chose the "The View" today, obviously reaching out to female voters, potentially.

KRAUTHAMMER: He said openly a few months ago that he wants to reenergize the constituency that elected him -- Hispanics, African- Americans, young people and women, and this was an appeal.

Look, the reason I think this will not move any needle is because when you're a challenger, you are a newcomer, charm works and you can get elected on charm. Once you have been in office and you want to be reelected, that is a referendum on governance, not on charm.

Everyone knows he is charming. But the issue is, can he run a government? And on that, there is a lot of skepticism.

BAIER: Another story developed today, and that is the story of the person who was alongside, standing next to the president in the Rose Garden. There you see here, Leslie Macko from Charlottesville, Virginia, as an example of why the unemployment benefits should be extended. He made this speech last week.

What the White House didn't know about Leslie Macko's story is that she became unemployed just after she pleading guilty to felony prescription drug fraud and she has another charge of felony grand larceny back in 2007.

Here's what Robert Gibbs had to say about all of this today.


WHITE HOUSE PRESS SECRETARY ROBERT GIBBS: I would certainly say that had that type of information been known, I doubt seriously that -- she would not have participated in the event here.


BAIER: A vetting problem for the White House. Charles, there are a lot of unemployed people to choose from.

KRAUTHAMMER: When you have 10 million unemployed and you can't find three who are clean, you have a competence issue. Can the gang shoot straight? That event happened, the press conference happened on the day of the Sherrod firing. And this is a group that wants to run national health care, run cap-and-trade and is dispensing $1 trillion of stimulus money as we speak.


STODDARD: Did you notice her looking shiftily around the Rose Garden wondering if it might be discovered at that very moment.

This is not a "Mission Accomplished" banner, but it is deeply embarrassing and obviously so easily prevented. It's just mortifying.

BAIER: Bill, you filibustered. We're going to end it there, the last panel.