Mystery and Speculation Surround Caroline Kennedy's End to Senate Bid

This is a rush transcript from "On the Record ," January 22, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: This is a "FOX News Alert." Secretary of State Senator Hillary Clinton is about to have a replacement for U.S. Senate seat. The governor of New York is now set to appoint Congresswoman Kirsten Gillibrand. This news is a political stunner. Who would have guessed this?

Yes, the other obvious news is that Caroline Kennedy is out. Within the last 24 hours, Caroline Kennedy removed herself from consideration for Clinton's Senate seat. Now, the million-dollar question is why did Caroline Kennedy bow out? Tax trouble? Nanny trouble? Potential problems in her marriage? Tonight the New York media is on fire, chasing down the story. Former House Speaker Newt Gingrich will be here in just a few moments.

But first, Ken Lovett, reporter for The New York Daily News, joins us by phone. Ken, why did she pull her name -- why did Caroline Kennedy pull her name out of this running?

KEN LOVETT, NEW YORK DAILY NEWS: Well, if you listen to Governor Paterson's people, he wasn't going to pick her. She's had a disastrous campaign to become a senator. And then add onto that the tax problems, a potential nanny problem, and then, you know, rumors and innuendo about her marriage. It didn't make for a good situation.

VAN SUSTEREN: All right, let's go down this list. Tax problems. What's the tax problem?

LOVETT: Well, you know, the governor's people really haven't listed what they are. The tax department, at least the state tax department, says they don't have her down for anything wrong, but it may be something that no one is aware of at this point. The nanny problem -- she may not have registered -- you know, or legally paid the taxes on the nanny or perhaps - - perhaps -- you know, we've seen in the past that the person wasn't a citizen. We don't know.

VAN SUSTEREN: How about the marriage -- how about the marriage -- is the marriage issue -- look, everybody's talking about it in the media. That is right now rumors. Anybody able to actually corroborate that it's anything beyond a lot of chatter and talk?

LOVETT: I've heard chatter and talk. I will say, though, that one of the people very close, and some of -- probably one of the closest to Caroline, said that her husband was having second thoughts about her going to Washington, and that basically said that if she took the job and went to D.C., then the marriage would be over.

VAN SUSTEREN: All right, now, let's talk about what the governor had to say. I have one quote -- and this might have -- you know, the New York press is a little bit wild on this story -- said that the governor said she was not ready for primetime. Is that really what the governor said, or is that what somebody's characterizing sort of...


LOVETT: No, that's what -- that is what one of the people close to the governor said, that the governor felt she wasn't ready for primetime. I mean, let's face it, she had an awful roll-out. She did an upstate swing, where she took almost no questions from the press. And then when she did agree to sit down and do a round of media interviews, they were disastrous. People focused on the fact that she said "um," "you know" all the times. She wasn't prepared on the issues. She never really gave a real sense of why she wanted to be a senator, other than she's a Kennedy.

VAN SUSTEREN: Well, you know, it's sort of interesting. People have said, quote, "She isn't qualified." Frankly, I may be one of the few -- I think she is qualified. She's a lawyer. She's smart. Not that being a lawyer necessarily makes you qualified, but I mean, at least, you know, she's got some level of, you know, ambition. But boy, what a lousy candidate she's been in terms of selling herself. It's almost like she'd be -- you know, she's terrible at selling at herself, her candidacy, but she -- you know, she could do the job.

LOVETT: Yes. I probably wouldn't disagree with you, and the probably has been, though, that she -- she did -- she didn't sell herself well. The other problem is it wasn't a real campaign. She's not out there to convince the widespread electorate. It's a campaign of one person. There's one vote, Governor Paterson. And obviously, she didn't do the job to sell it to him.

VAN SUSTEREN: Indeed, she did not. The breaking news tonight, Representative Gillibrand will soon be Senator Gillibrand from the state of New York, and she will be taking the Senate seat that was occupied now by Secretary of State Hillary Clinton. Ken, thank you.

LOVETT: Any time.

VAN SUSTEREN: Former speaker of the house Newt Gingrich joins us live. Mr. Speaker, I want to talk to you about the Treasury -- the man nominated for Treasury secretary. But first, what do you make of this Caroline Kennedy news tonight?

NEWT GINGRICH (R), FORMER SPEAKER OF THE HOUSE: Well, I think it's a little bit amazing the way this whole thing has played out. And I think, frankly, it demeans Caroline Kennedy a little bit. She has been a public citizen. She's been very active in the arts. She's been very active in a number of philanthropies. She's not a professional politician, and I don't think holding her to the standard of a professional politician necessarily is the right thing to do.

But as you pointed out, there's only one vote that matters here, and that's the governor. And I think the governor decided to go to somebody who had come up in politics, had won public office. Interestingly, he did not pick Andrew Cuomo, who I think people thought was the natural alternative to Caroline Kennedy. So we'll have to wait and see what happens next year, when they actually have an election for this seat, and whether or not Andrew Cuomo decides to run for the Senate seat in the Democratic primary.

VAN SUSTEREN: Mr. Speaker, though, if, indeed, she has tax, nanny and marriage issues -- and certainly, tax and nanny, which we'll talk about in a second about Tim Geithner -- but I mean, why -- wouldn't you think she would have been smart enough than to throw her hat in the ring on this? Because we've all been around the block on these tax/nanny issues.

GINGRICH: Well, first of all, you're watching Mr. Geithner, who has a tax issue, and he's not throwing in the towel. He's trying to brazen his way to the secretary of the Treasury job.

Second, we don't know what she has, and we don't know that that was really the problem. She only had to pick -- you know, the governor could pick her with any kind of problems she has. And if he names her, she is the senator. So I think, you know, that's not necessarily a problem.

I wonder, though, if deep down, as she looked at her life, if she really wanted to try to do this. And I think when she did go around New York and she did do all those interviews, I suspect it was a very unpleasant experience for her.

VAN SUSTEREN: All right, let's...

GINGRICH: And I don't think it's something she wanted to necessarily continue.

VAN SUSTEREN: All right. The nominee for Treasury Secretary has made it out of his committee. Is this a good choice for Treasury Secretary, sir?

GINGRICH: Well, I think it's bizarre that with President Obama in his inaugural promising us transparency and accountability and a higher standard of ethics, that they are marching forward to approve a Secretary of the Treasury who in 2001, 2002, 2003 and 2004, did not pay self- employment taxes for Medicare, Social Security. At American Solutions, we've had a poll running for a day-and-a-half now. Fifty-nine thousand people have answered it so far, and they've voted 97 percent to 3 against confirming him because I think the average American figures out that if they hadn't paid their taxes for four years, they sure wouldn't be getting a nomination.

By the way, he also did not have any penalties from the IRS, and I doubt if anybody who's a normal American believes they could have avoided $48,000 in liabilities and not have had some kind of severe penalty from the Internal Revenue Service. So here you have a guy who couldn't pay his own taxes, couldn't figure out what was going on, didn't pay them once he was told they were due, and now we're going to put him in charge of the Internal Revenue Service? I think that's a very demoralizing position.

VAN SUSTEREN: Here's another thing that troubled me a little bit about him, that when he figured out he had a problem, he realized that for two of the oldest years, he was protected by the statute of limitations. And you know, he had a legal right at that -- I mean, he didn't have to pay them because nobody could go after him legally. But just sort of on a moral ground, if you're going to be Secretary of Treasury, you'd think that -- you know, that kind of person would have wanted sort of to jump up and pay it, even though he didn't have to, just to sort of to set an example, if nothing else. Until he got -- once he got shoved against the wall, he then did it, but boy, he seems a little bit late to wanting to fix these things.

GINGRICH: Well, let me say this. Senator Jon Kyl did a great job in the Finance Committee hearing yesterday and kept boring in on this issue and asking this question over and over again. And it became very obvious, and Geithner finally admitted that if he had not been nominated to the secretary of Treasury, he would never have paid his back taxes.

Now, remember, Vice President Joe Biden kept telling us it was patriotic to pay our taxes, so it's kind of weird that they now want to push through a secretary of Treasury, who by the Biden standard was clearly unpatriotic for four years.

VAN SUSTEREN: So tomorrow -- so when he -- it's pretty clear to you that this guy's going to be the next Treasury Secretary when they have the vote. I don't know if they've had it tonight. But they -- at least...


VAN SUSTEREN: It's a given at this point.

GINGRICH: No. The last thing we...


GINGRICH: Well, the last thing we heard was that they were not going to the floor until next week with final confirmation. He did get a big vote out of the Finance Committee, but five members did vote no. And frankly, one of the things at American Solutions, as we began to get this 97-to-3 number, and as more and more people pay attention to this, I wouldn't be at all surprised by Monday to see an amazing number of Americans taxpayers calling their senators and e-mailing and wiring their senators and saying, Do not approve a secretary of the Treasury who did not pay his own taxes.

VAN SUSTEREN: There's a good chance that 59,000 of those will probably come after voting on your Web site.

All right, Mr. Speaker, if you'll stand by, we have more with you in just two minutes.

And up next: President Obama and Chief Justice Roberts flub oath number one at the inauguration. Thirty-one hours later, the two Harvard law grads -- they try it again. But now the thorny question. Are the new president's executive orders signed between the flubbed oath and the perfect oath valid? The Speaker tells you.

Plus, "On the Record" becomes "The No Spin Zone." Bill O'Reilly is here, and we are warning you right now Bill and I have a little bit of a dust-up. The word "pinhead" comes up. You'll need to see this.


VAN SUSTEREN: Day three of President Obama's first term is almost in the history books. Already the new president is making some big moves. This morning, a little before 11:20 AM, President Obama signs four executive orders, the biggest headline, a commitment to close the U.S. prison at Guantanamo Bay, Gitmo, within one year.

About 1:40 PM, White House press secretary Robert Gibbs begins his first press conference. Before long, Secretary -- press secretary Gibbs is grilled about President Obama deciding to take the oath of office again last night.


QUESTION: You said yesterday it was out of an abundance of caution that you did the re-swearing-in. Out of that same abundance of caution, has he re-signed the executive orders...


QUESTION: ... That he did yesterday?

GIBBS: No. The Constitution, as Greg said in his statement, is -- prescribes an oath. A word was misplaced, and out of an abundance of caution, the Chief Justice, over the course of a 25-second period of time and under the slow and careful instruction of the president, the oath was re-administered.

QUESTION: And in terms of transparency, why didn't you show the world this?

GIBBS: We did show the world this.

QUESTION: Well, there was no -- you know...


QUESTION: ... Crackling audio recordings of it. There's some stills. No video.


VAN SUSTEREN: Will President Obama's decision to retake the oath of office become a headache for the new president? Former Speaker of the House Newt Gingrich is back with us.

Mr. Speaker, before we get to this, I do need to know, are you -- I mean, why are you in Hattiesburg, Mississippi? Is it because it's the home of the greatest quarterback ever to play in the NFL, Brett Favre, or is it another reason?

GINGRICH: Well, I have to say, thanks to you, in part, we had a great meeting this afternoon with Brett and Diana (ph) Favre. And as you know, as Green Bay fans, he's just -- it's amazing. It was wonderful to be with him.

But I'm actually down here for First Priority, which is a tremendous campus- based ministry of young people that reaches out across the country and has literally, in Mississippi alone, reached over 7,000 young people and helped them to find a better life. And so First Priority for me became my priority. Although I have to confess, getting to hang out a little bit with Brett Favre and Diana Favre was a very big moment for us.

VAN SUSTEREN: Indeed, it is for all football fans. All right, now turning back to the news of the day. All right. President Obama has now taken that oath a second time, after that first one was flubbed. And let me confess, I -- you know, I can understand the flubbing. I'm so capable of flubbing it myself. But now he's taken it a second time. Between oath number one, the flubbed one, and oath number two, he signed executive orders. Are those orders -- should he re-sign them now, just out of an abundance of caution, since apparently, they thought that he hadn't really done the oath right?

GINGRICH: Well, first of all, as I understand it, it was the Chief Justice who got it wrong. And there's probably a good argument, on something that important, to read it, rather than try to memorize it. So I don't think the president bears any burden on this.

Second, since it was the Chief Justice, any legal challenge would end up going to the Supreme Court, where I suspect the Chief Justice would uphold the president. And the reality is the entire world saw the president take an oath. The entire world understood that at that moment, he was president of United States. And for all practical purposes, I don't think they actually had to do this.

But you know, it's fine. They wanted to be overly cautious. I don't think -- I don't think it's a big deal but -- and I wouldn't make too much of it. But he was, for all practical purposes, president of United States from the moment that he gave the oath, even if one word was out of place.

VAN SUSTEREN: You know, there's something about it, though, that was so human, the flub, that -- you know, for some reason, I liked both of them for it. They're both Harvard law graduates, so that shows that -- you know, it's so inspiring to the rest of us if they couldn't get that oath right. I imagine they were both a little -- actually, it was Chief Justice Roberts who sort of tripped up the president. But maybe it was payback because the president...


VAN SUSTEREN: ... When he was in the Senate, voted against the Chief Justice getting the job.

GINGRICH: No, I think it was just a mistake. You are right, it's proof that even two Harvard law graduates at the very top of the executive and judicial branches can make a mistake. However, I suspect if he could do it over again, that Chief Justice Roberts would read the oath, which is, in fact, what most Chief Justices have done historically precisely because you're out there in front of, you know, 1.8 million people in the Mall and about a billion people on worldwide television, and then you blow it. I mean, it's -- it was a pretty embarrassing moment, I think.

VAN SUSTEREN: All right. And maybe -- and like I say, it's the last thing...

GINGRICH: And I would not...

VAN SUSTEREN: ... You sort of...

GINGRICH: ... Recommend it as a habit.


VAN SUSTEREN: I wouldn't, either. Little bit -- although it made me like both of them a little bit better when I saw how human. All right. We're only on day three. We've completed day three. What's your thought so far about -- how's the president doing?

GINGRICH: Well, I think he's doing fine for the moment. I think he is implementing policies that will be very troubling later on. It bothered me, as somebody who believes deeply in national defense, that one of his very first acts was to suspend the military tribunals of terrorists. I think that's a mistake.

I think that -- you know, he can sign a note saying we'll close Guantanamo, but the truth is, they have no idea what they're going to do or where they're going to put the terrorists if they're not in Guantanamo.

And I'm concerned that the way the Congress is trying to write this new supplemental package, it's going to be a total mess. Remember, they're trying to pass a bill in a week or two that will spend more money than the entire war in Iraq and war in Afghanistan combined. Now, to try to do that in a week or two in this Congress is an invitation to corruption and an invitation to waste and will be a mess. And I think that's something they should worry about because they're going to live with it. They're not going to able to blame George W. Bush if this new bill turns out to be a real mess.

VAN SUSTEREN: All right. Corruption -- we don't want corruption, but if that's just sort of a little collateral damage, is it going to jump- start the economy? Is it going to stimulate it? Is it going to mean jobs for people?


VAN SUSTEREN: I mean -- you know -- no? Why not?

GINGRICH: Look, the Congressional Budget Office has reported that less than 10 percent of the bill will be spent the first year. Some of it would not be spent for 10 years. This is not a stimulus package, this is a bigger government, more bureaucracy, more powerful politician package in the guise of a stimulus. And I think we ought to -- you go through that bill step by step, and you'll be startled at how bad it is and how bad the provisions are. Now, let me give you just one example.


GINGRICH: New York state has about $5 billion -- go ahead.

VAN SUSTEREN: I was going to -- is this a horrible idea or just maybe...


GINGRICH: Greta, it's not a horrible idea, it's a horrible legislation. Now, that's the problem they're going to run into. This isn't campaigning. This isn't running around making speeches. There has to be a bill written. The bill has to have legal meaning.

I mean, I helped pass a balanced budget, and Bill Clinton and I actually balanced the budget for four years. There was an amazing amount of detail you had to get done. These guys are out here throwing stuff up on the wall and writing press releases as though it was legislation. And this is going to be a mess, the way they're doing it. They should slow it down, think it through, do it in regular order, and make sure that they have hearings so they surface all the mess.

VAN SUSTEREN: And I got to go. Mr. Speaker, thank you for joining us.

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