Forbes Misfortune: CEO on Paulson, Bernanke, and the Bailout Bust

This is a rush transcript from "On the Record ," September 29, 2008. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: We continue with our breaking news coverage of the crisis that is threatening our nation. The financial bailout bill has been rejected by the United States House of Representatives.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke both urged that the bill be past. Who are these men with so much power over our economy? Joining us is the President and CEO of Forbes, Steve Forbes.

Nice to see you, Steve.

STEVE FORBES, PRESIDENT, CEO, FORBES: Good to see you, Greta, thank you.

VAN SUSTEREN: Steve, are these two men that you have the right idea, and who are they?

FORBES: I think the idea wasn't a very great one. They made real mistakes letting the dollar weaken, keeping crazy accounting practices like mark to market, which really made this crisis worse. So they have a lot to answer for there, especially on strengthening the dollar.

Hank Paulson came out of Wall Street, as you know, Goldman Sachs. He was a very effective chief executive used to having his way, and I think that hurt him, certainly with House Republicans.

He came in like a drill sergeant with raw recruits, and they didn't like it at all. He really hurt his prospects for the bill with the way he and his colleagues handled the house Republicans.

Ben Bernanke comes out of academia, Princeton University. He studied the Great Depression, and his conclusion was that you just throw money at it, that you just keep printing more money and all will be well.

And that's why he once made the allusion that if anything, if all else fails, you just go out in a helicopter and throw out money. So they call him "Helicopter Ben."

For 13 months, "Helicopter Ben" has been throwing Federal Reserve money out, finally realized, with Hank Paulson, that they had to have a systemic approach instead of this ad hoc churning of the printing press, which obviously wasn't curing the crisis.

VAN SUSTEREN: Steve, you and Speaker Newt Gingrich agree on the mark to market. That's one issue.

The other thing is this Secretary Paulson thing, which I must admit I find disturbing, and maybe I need more information, but he let Lehman Brothers go under. AIG was bailed out with $85 billion.

And they had this secret meeting or private meeting--most of these high-profile meetings are private so they don't affect the markets-but at that AIG meeting where they got the $85 bailout, there is a Goldman Sachs person there because they have a $20 billion interest in AIG. It just looks bad.

FORBES: Well, it did look bad, and the decision on Lehman Brothers is now being second-guessed, that this is one firm that they're going to be in the business of saving firms that had enormous influence, and really had a bad, bad impact when they let it go under.

With AIG, the deal Paulson cut, to be fair to him on AIG, was one that Tony Soprano would have been very proud of--huge interest rate, taking 80 percent of the company, and the terms are amazing.

The company has to pay $1.7 billion as a fee. If they don't use any part of the loan, they have to pay 8.5 percent on it, about 10 times what you would normally pay. So on that one I think the taxpayers are going to come out ahead when they break this company up--many good parts to it, only one part of it was bad, the rest of it was excellent. So we'll come out ahead on that one. But the whole approach to this crisis, not realizing you've got to strengthen the American dollar. When you have a weak dollar it's going to hurt the economy. Just as a weak military hurts national security, so too, a weak dollar hurts the economy.

And that's something this administration, first since Jimmy Carter, has not recognized that. And I'm glad the Speaker, former Speaker Gingrich recognizes, too, as some of us have recognized that this mark to market, artificially marking down the value of these assets has made this crisis immensely worse.

VAN SUSTEREN: We only have 30 seconds left. For someone who makes less than $50,000 a year, how is this crisis going to affect them?

FORBES: It's going to affect them if they don't get the bank system back in shape. It means they're not going to able to get credit say to buy a new car. They may lose their jobs.

This thing is very serious. They've got to do something in the next few days.

VAN SUSTEREN: It really is a matter of a few days?

FORBES: I think if people feel this thing is going to drift on--the credit system, Greta, has already seized up. It's already starting to suffer cardiac arrest. Banks are clutching the money. And when they clutch money, that means the economy is not getting it, and that's bad.

VAN SUSTEREN: Steve, thank you.

FORBES: Thank you.

Content and Programming Copyright 2008 FOX News Network, LLC. ALL RIGHTS RESERVED. Transcription Copyright 2008 ASC 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 ASC LLC's copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.