This is a rush transcript from "Journal Editorial Report," February 2, 2013. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," the immigration debate heats up as both sides stake out their positions. A look at the politics and the possibilities this time around.

And remember those fat-cat bankers President Obama used to talk about? Well, he has nominated one for his treasury secretary. We'll dig deeper into Jack Lew's tenure at Citibank.

And just in time for Super Bowl Sunday, the president weighs in on football violence. He is not sure he would let his son play. Should you?

GIGOT: Welcome to the "Journal Editorial Report." I'm Paul Gigot.

A potential breakthrough this week on one of the nation's most divisive issues as a bipartisan group of Senator laid out the framework for a comprehensive immigration reform deal a day before President Obama took up the issue in a Las Vegas speech. But the road ahead is far from smooth with one of the biggest obstacles being what to do with those illegal immigrants already in the country and how easy their path to citizenship should be.


SEN. MARCO RUBIO, R-FLA.: If this endeavor becomes a bidding war to see who can come up with the easiest and cheapest pathway to green card possible, this thing is not going to go well.

PRESIDENT BARACK OBAMA: We have to deal with the 11 million individuals who are here illegally. We all agree that these men and women should have to earn their way to citizenship, but for comprehensive immigration reform to work, it must be clear from the outset that there is a pathway to citizenship.


GIGOT: Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; Political Diary editor, Jason Riley; and assistant editorial page editor, James Freeman.

Jason, you have followed this for years, written a book about immigration. What is the substantive policy case for immigration reform out of Washington?

JASON RILEY, POLITICAL DIARY EDITOR: Policy wise, I think that they help our economy.

GIGOT: Immigrants, legal or illegal?

RILEY: Giving foreign workers access to our labor markets makes those markets more efficient and makes us a more productive country economically. That has been the case for hundreds of years in this country. And just as the free trade of goods and services makes our economy more efficient, so does the free movement of labor across international borders. That is the economic case. These workers are filling niches in our labor markets that help make us more efficient.

GIGOT: OK, fair enough. But they are already here, OK?


GIGOT: So 11 million is the estimate. Why just not settle for the status quo rather than trying to make them -- put them on a legal path and change the law?

RILEY: First of all, if they are here illegally, they are open to exploitation by employers. We don't want that. Also, as you mentioned, the economy has absorbed those that are already here. But our economy will continue to grow, maybe not as much as we like under the current president. But we will grow again and have a need for more workers from these countries. We need a legal way for them to come.

GIGOT: So we need more workers at the top end through skilled sciences, technology, engineers because we are not graduating enough Americans for that role. But you also, most low-skilled works for industries like farm labor, hospitality, construction and a lot of other things?

DAN HENNINGER, COLUMNIST AND DEPUTY EDITOR: Let's emphasize that point, Paul. We're not talking about a marginal matter in the economy. These workers are integral to the economy in states like Georgia and Iowa. Meat packing in Alabama, chickens, Texas, construction. All those industries employ a lot of these low-skilled immigrants. Some of them are illegal and some of they will legal, but they're an integral part of those restaurants. The restaurant industry in New York would collapse over night if they weren't there.

Now the issue is whether Americans will take those jobs is unclear. The evidence suggests they won't. Those industries can't hire, simply remove these immigrants and replace them with American workers.

GIGOT: I think the evidence is clear on that in agriculture, for example, where the lack of farm workers has caused many American growers move south of the border?

RILEY: Sure. Sure. And we should be clear here, Paul, economists are worried about using the word need. Would America survive if we sealed our border? Sure, we would. The question is here though is not whether we just want to survive. It's whether, would we better off with these workers doing certain jobs? Do we want people with high school degrees or college educations in the field picking crops?


RILEY: What would do? If the price were right, you might, if you paid them $100,000 a year, they might. But what would that do to the price of food? What would that do to the cost of going out to dinner at a restaurant? You can't just increase prices wily-nilly.

GIGOT: You're talking about --

RILEY: I mean, there are consequences.

GIGOT: We want a free labor market --


GIGOT: -- with a lot of opportunities for people and then people able to fill those openings.

James, let's talk about the politics here. Have the politics changed from 2007 on immigration when it last went down in flames in the Congress?

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: We'll see. On the Democratic side, we'll see if President Obama, who helped kill that reform, now wants to play a constructive role in this one. We hope so. On the Republican side, maybe this is one benefit of the election, where there were a lot of people coming out afterwards with a lot of crazy lessons for the GOP.


When the problem was really Mitt Romney. This is one area in terms of reaching out to Hispanic voters where --


GIGOT: Not just Hispanics but also Asian immigrants and --

FREEMAN: All different ethnic groups where the political desire may match up with the public policy where the outcome here. Julian Simon used to talk about how human beings are the greatest natural resource. What is our advantage in the United States over our competitors? In the Obama era, it's tough to come up with that list, but one is our population is still growing. We benefit from it.

GIGOT: Another big change, Dan, Marco Rubio, Florida Senator, Republican, conservative, no question about his conservative credentials, leading the fight on this at some political risk.

HENNINGER: Yes, you have to give him some credit for doing that. I think he is trying to get this problem off the Republicans' back because it is damaging them in these elections. There is no question about it. Some on the right say, well, Hispanic voters will never voted entirely for the Republican Party. They need them all voting for the Republican Party. They need them back above 40 percent, which was the number George W. Bush got, not down to 25 percent.

GIGOT: Jason, where could this break down? The two sides are moving together but there's still a long way to go.

RILEY: I think Marco Rubio and the bipartisan plan out of the Senate gave a lot of ground with the guest worker program and in terms of -- I'm sorry, I should say the legalization --

GIGOT: The path to citizenship.

RILEY: The path to citizenship. They gave a lot of ground because, under the bipartisan plan, these folks will get probationary status right away. The whole disagreement is how they get from there to a green card.

GIGOT: How long that would take --


RILEY: And how long that would take.


GIGOT: Democrats want it almost immediately, the path to citizenship. Rubio --

RILEY: That's right. And Republicans want a longer path.

GIGOT: And Rubio says you've got to the back of the line from the people who waiting for green cards.

And then the other problem is potential guest worker program. Because AFL-CIO and Big Labor doesn't want that kind of guest worker? Why? Because they wouldn't be union workers.

RILEY: That is the key to making this work going forward, getting in place a legal system for people to come so they don't come illegally. That works in tandem with securing the border. There is less pressure on the border if people are coming legally.

GIGOT: That is part of the border security solution.

All right, Jason, thank you.

Still ahead, remember those fat cat bankers President Obama blamed for the financial meltdown? One of them is about to be treasury secretary. When we come back, we'll take a closer look at Jack Lew's time at Citibank. The details might surprise you.



OBAMA: The American people will not excuse or tolerate such arrogance and greed. The road to recovery demands that we all act responsibly, from Main Street to Washington to Wall Street.

-- but yet, some people on Wall Street who took these unbelievable risks with other people's money.

It's also imperative that those in Wall Street board rooms and on trading floors be held accountable for the decisions that they make.


GIGOT: President Obama, criticizing what those he famously called fat-cat bank cats on Wall Street, the very same people he blamed for the financial crisis. Now it appears one of them will likely be our next treasury secretary. The president's nominee for that post is none other than Jack Lew, the current White House chief of staff and former executive at Citibank, perhaps the most trouble of too-big-to-fail banks and recipient of a $45 billion taxpayer bailout.

Wall Street Journal assistant editorial page editor, James Freeman, has been looking into Mr. Lew's time at Citibank.

First, let's put this into context. Citibank was a particularly big player in the financial crisis.

FREEMAN: Yes, that is right. One of the banks of the center of the mortgage meltdown. In 2007, Citi was one of the first to have difficulties when they had been managing these off-balance sheet vehicles to invest in mortgages. Those started to go south. They ended up at the end of that year having to take them in-house again and stand behind them, which put a lot of financial pressure on the firm. But I think this is going to be a test, this nomination, about whether Americans are still outraged about the bailout.

GIGOT: They had a $45 billion taxpayer capital injection --

FREEMAN: That's right.

GIGOT: -- as well as a guarantee, a federal guarantee of more than $300 billion in bad loans. There is no question in your mind Citibank would have failed without federal intervention?

FREEMAN: The question -- I think it would have. The question in my mind is whether they should have let it fail and --


GIGOT: -- do so. And Sheila Bair, the FDIC chair at the time did as well. But she was opposed by other people in the administration.

So let's get to Jack Lew and his role at Citibank? What was his job?

FREEMAN: Maybe the most interesting one is, in early 2008, he takes the helm at what's called Citigroup Alternative Investments, that ran hedge funds and exotic off-balance sheet vehicles, had just taken them in house when he came on board. It was basically a unit that, if it wasn't the inspiration for the Volcker Rule that wanted to stop big banks --


FREEMAN: -- gambling with taxpayer's money, it easily could have been. It was a disaster. The losses were enormous.


GIGOT: But the defense of him would be, he came on in 2008 and all the bad decisions had already been made. You can't blame Jack Lew for things that other bankers at Citigroup did?

FREEMAN: OK, but he is now setting himself up. He is now the --

GIGOT: Is that fair though? I mean, is that a fair point in his defense?

FREEMAN: It is fair that certainly a lot of mistakes were already made, a lot of the bad bets were already made. Whether they could have made some different decisions starting in early 2008? Possibly. But I think the key issue for them is his job as secretary of treasury would be, now after Dodd/Frank, the 2010 law, would be basically being in charge of spotting risks in the financial marketplace. He is running something called the Financial Stability Oversight Council if he becomes treasury secretary. This is deeming certain companies systemically important, identifying risks of the financial system. Was he able to identify any risks at Citigroup?


GIGOT: Did he see the iceberg coming?


GIGOT: And why would he fine a unit if it was headed towards the rocks?

FREEMAN: Yes, so what is the answer? What he clueless? He had no idea of the risks they were running? Or is he going to say, no, I saw the risks. And if so, why didn't he say anything. I don't remember him being a big whistle-blower in 2008. I don't think anybody else does either. So there are difficult questions for him. And this was not his first job at Citi. In 2006, when he first started there, he ran their private wealth -- he was the chief operating officer at their wealth management division. And big questions there, too.

GIGOT: Because they had been sued for selling what are alleged to have been bad assets that they knew bad and that is a lawsuit going through the courts right now.

FREEMAN: Well, they have paid $85 million in settlements, an undisclosed number of other private settlements. They will be paying more. The question is, what did he think, were they mistreating customers, were they pushing people into risky mortgage and municipal bond investments without properly disclosing.

GIGOT: How big of an issue is this going to be in the confirmation?

FREEMAN: I think -- this is in question. I think it ought to be a big issue because he ostensibly was running, overseeing their legal affairs, which really relates directly to disclosure --


GIGOT: We have argued that you can't hold bankers responsible by themselves. The federal government had a big role to play in it.

FREEMAN: Right. What we said, look, there is greed on Wall Street. There was greed in 2008. There always has been. That is part of the story. It's not the whole story. There are a lot of regulator mistakes that got us here. But to say that someone shouldn't be prosecuted is different than saying he ought to be secretary of the treasury, he ought to have the most important job in international finance. And I don't --

GIGOT: And his experience and expertise ought to be challenged in a confirmation --


FREEMAN: I think it will be. Obviously, the Senate is focused on Chuck Hagel. Once they move on to Jack Lew, there could be some questions.

GIGOT: OK, James, thanks so much.

Still ahead on this Super Bowl weekend, President Obama says that although he is big fan, he would have to think twice before letting his son play football. A closer look at violence in the game and what can and should be done about it.


GIGOT: Well, just in time for Super Bowl Sunday, President Obama is weighing in on the subject of violence in football. The president, father to two daughters, told the "News Republic" in an interview this week that, quote, "I'm a big football fan but, I have to tell you, if I had a son, I'd have to think long and hard before I would let him play football."

We're back with Dan Henninger, Jason Riley and James Freeman.

James, was the president right here to maybe not let his son play?

FREEMAN: Well, I suppose you ought to think long and hard about anything your kids want to do. But I think something that ought to be injected in this debate is the idea of relative risks. Judging from his vacation photos, I think he likes to ride a bicycle. it kills more than 700 people a year. So if he is going to think long and hard -- and this would relate to his daughters as well.

GIGOT: But the issue is whether you want young kids with growing brains whacking each around in the head and undergoing concussion risks. Are those concussion risks especially severe, and severe enough that you would say, you know what, play something else?

FREEMAN: This is THE big question. We have seen a bunch of NFL players develop problems after playing, guys who played a long time in the league.

GIGOT: Suffered a lot of concussions.

FREEMAN: Right. And a brain condition, called CTE, which scientist are trying to get a handle on, figure out what the damage is. Then the question is, is this a real risk for young people? It may be. This ought to be studied. But when you look at the data in terms of college athletes, certainly football is a violent game, the injury rates are higher, but not all that much higher than soccer and field hockey, other fall sports, where kids get injured and they do get concussions. I think a little relative risk assessment is in order here.

GIGOT: Jason?

RILEY: I think one question I have is how much Obama's comments is shared by the general public, particularly middle-class, upper middle class families. I think the research they have been looking at is a growing body. It is not conclusive. But it shows, from what I've read, that even blows that do not result in concussion, that do not show up in concussion data can cause serious brain trauma, can cause neurological disorders, CTE and so forth. And sometimes we watch these football games, and we watch the spectacular blows, the wide receiver running the cross pattern, where the corner back lines them up, or people returning kick-offs or punts, or a quarterback blind-sided.

GIGOT: Right.

RILEY: But it's really the linemen that these the studies show showing up with CTE that play after play are doing less violent hitting but constant hitting throughout the games and throughout their careers. It's showing up, their brains are starting to look like boxer's brains.

GIGOT: Dan, what do you think?

HENNINGER: I think the problem by and large lies with NFL and professional football. They are the guys that are trying to use their helmets spearing people and hitting one another as absolutely as hard as they can. It translates down to Pop Warner League and high school, where kids start using technique that has are absolutely the incorrect way to play football. The pros don't care. These guys are just killing one another.

GIGOT: In order to make millions of dollars a year, I mean, obviously --


RILEY: And Obama made that point. He's more worried about the college players.

GIGOT: Here's the thing, I played high school football and a little bit in college, some people say maybe I have some brain damage too.


FREEMAN: Yes, we --



GIGOT: But I know hundreds of people that played. I don't know anybody that has that injury like that. Maybe it's the sort of thing people don't talk about. But you get these other benefits of teamwork. It's something to do after school. I don't know what I would have done after school if I didn't have organized athletics. And that is great for kids, particularly young boys. They need that activity.

FREEMAN: They need to run into things. That is how young boys are. Unless you're going to say we are eliminating sports and eliminating activities -- bicycling, as I said if you are parent, that is more imminent risk of death for your child. It ought to be considered that there are virtues to this game, but we don't know what the risks are. I talked to Thomas McAllister, a Dartmouth researcher. He has been putting sensors in football helmets and measuring impacts. He's seeing a lot of big hits, but whether that hurts people long term, who knows.

GIGOT: Thank you, James. Good discussion.

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


GIGOT: Time for "Hits and Misses" of the week.

Dan, first to you.

HENNINGER: Paul, you talk about misses, New York Governor Andrew Cuomo pushed through a big gun control law in the New York State legislature. His Quinnipiac poll dropped 15 points. There are few things in politics you can do that can cause your approval rating to drop 15 points. I would say the odds of the Obama/Biden gun control law in the Senate is going to pass just dropped about 15 points.




RILEY: New Jersey Governor Chris Christie is running for reelection but it's increasingly difficult to tell whether he is running as a Democrat or a Republican. We had the "bromance" over President Obama over Hurricane Sandy. And now, he wants to raise the minimum rage in a state where the unemployment rate is much higher is much higher than the national average. And the minimum wage, as we know, is a proven job killer. So a big miss for the big guy.


GIGOT: All right.


FREEMAN: A hit to our colleagues in the media who are finally calling Al Gore on his hypocrisy. He went on a book tour this week and he expected the usual loving attention from various TV networks and, instead, a lot of anchors and hosts were asking him how he could sell his Current TV to big oil, Al-Jazeera, supported by the government of Qatar, and a network that has lauded and celebrated terrorists to boot. So good for the media for finally waking up on Al Gore.

GIGOT: Mark it down, historic moment, Freeman praises media.


Send it out as a press release.


GIGOT: And remember, if you have your own "Hit or Miss," please send it to us at jer@FOXnews.com. And be sure to follow us on Twitter at JERonFNC.

That is it for this week's show. Thanks to my panel and to all of you watching. I'm Paul Gigot. We hope to see you right here next week.

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