This is a rush transcript from "The O'Reilly Factor," September 26, 2008. This copy may not be in its final form and may be updated.
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BILL O'REILLY, HOST: The top story tonight: the state of the union with Newt Gingrich.
The former speaker of the House is in a unique position. He knows the players. He knows the corrupt system. I spoke with him a short time ago.
O'REILLY: Mr. Speaker, I'm glad to get to talk to you tonight because I'm getting the anger from the folks. Why didn't anybody tell us about this stuff?
NEWT GINGRICH, FOX NEWS CONTRIBUTOR: Well, look, I think to a large extent, we're faced with a genuine crisis of the system because the politicians on Capitol Hill who should have been doing this weren't, and the bureaucrats and the executive branch who should have been doing this weren't. And now they're all going to scurry around and try to cover it up and have sort of an agreement of silence, and it's profoundly wrong.
O'REILLY: When you say they weren't doing their job, are they just stupid? Or are they trying to play a game with the American public? That's their job to be watchdogs, to let us know if the fundamentals of the economy are tottering. So why didn't they let us know?
GINGRICH: One of the provisions that I wanted to put into any kind of financial package is that no company that gets money from the Treasury in this process be allowed to hire a lobbyist. I mean, what you have today is that the rich in Wall Street and the powerful at Fannie Mae and Freddie Mac had so many politicians beholden to them that, in fact, nobody was going to check them. And so they got away with things that were absolute bologna, and it's a tragedy.
O'REILLY: Here's a good example: Hillary Clinton, $600,000; Barack Obama, $500,000; John McCain, 150,000 from Freddie Mac, was it? I believe — it's one of the two, all right. So you're saying because...
GINGRICH: You know, one of the…
O'REILLY: Go ahead.
GINGRICH: One of the ground rules you may have to adopt is that nobody can give money from a PAC or a lobbyist who represents an industry your committee supervises. You have to raise your money away from your own committees.
O'REILLY: So you agree with me that both parties are at fault. Now let's get into the personalities.
O'REILLY: Barney Frank is in charge of the finance committee. Barney Frank was pushing loans to poor people, which, you know — look, we feel bad for Americans who aren't making a lot of money. They need a house, too. How culpable is Barney Frank on this?
GINGRICH: Well, the whole effort starting with the Clinton administration in which Franklin Raines, who had been Clinton's director of the budget, became the head of Fannie Mae, the biggest single institution lending money for housing took — got $90 million in six years, and is now Barack Obama's adviser on housing. They announced very proudly in 1999 that they were going to put people in housing that couldn't afford it.
Now you don't do somebody a service if you get them overextended into a home they can't afford. If you get them training so they can get a better job, that's good. If you teach them how to save money so they can some day afford a house, that's good. But overextending people as liberals did throughout this period is not a good thing.
And frankly, Republicans began to go along with it because the political pressure was so great. How could you say you didn't want poor people to have a house? Well, it turns out if you don't — if you're too poor to afford a house, in the long run you get hurt if you are lured by the government. And I think a lot of the pressure on Fannie Mae and Freddie Mac and other lending institutions was pressure directly from the politicians to help the poor get into houses they couldn't afford.
O'REILLY: All right. Is it the same situation with Dodd today? Reid gets out there as I just said in my "Talking Points Memo" and says Dodd's been in the Senate Finance Committee his whole career. I didn't hear Dodd say a word to me about any of this.
GINGRICH: In Dodd's case, he is the largest single recipient of money from Freddie Mac and Fannie Mae. Barack Obama was No. 2. The fact is that to have Dodd preside over writing this bill, I think, is absolutely disgusting. I am appalled that Harry Reid appointed him to sit in there. But it is the nature of politics up there right now. And I think it's very, very bad for the country.
O'REILLY: Why would you disqualify Dodd? Why would you say Dodd can't be a part of this? Why?
GINGRICH: I mean, this is a guy who's totally in with all the people on Wall Street and all the people at Fannie Mae and Freddie Mac, and they have paid his campaigns. They have given him money. They have put in a position of power. And now he's going to turn around and write a bill to give them money? There's something profoundly wrong about the current system.
O'REILLY: It looks like President Bush, once again, was caught unaware.
GINGRICH: I am very embarrassed to have a Republican president and a secretary of the Treasury come to the Congress for $700 billion of your tax money with no strings, no controls, no accountability. This entire performance the last two weeks, I think, is embarrassing to any fiscal conservative and anyone who believes in limited government. And I can't explain it, and I can't defend it.
O'REILLY: But the key question is President Bush didn't use his bully pulpit to warn people not to buy AIG.
GINGRICH: I know.
O'REILLY: Not to buy Lehman Brothers.
GINGRICH: I don't think he knew. And I don't think he was told. And I think he has been significantly failed by his staff and by his cabinet, and I think it is tragic.
O'REILLY: All right. We're going to take a break. We'll be back with the speaker in a moment. There are two more questions on the bailout, and then we'll do a little analysis of the debate as "The Factor" continues all across the USA.
O'REILLY: Continuing now with Newt Gingrich, the author of the new book "Drill Here, Drill Now," with whom I spoke a short time ago. He is in Atlanta.
O'REILLY: Now, I have supported the bailout because I believe if the government doesn't stabilize the economy now, foreign investment will pull out of America. Now you know how important foreign investment is to this country's health. So I don't like this bailout. I agree with you that the government is incompetent and corrupt in some areas. But I don't see any other choice at all but to do it.
GINGRICH: Well, let me give you two choices immediately. First, there's an accounting rule called mark to market. We were warned against doing it by the European Central Bank in 2004. Two economists — Chicago Bank Today came out and said if we would simply repeal it — this is an overreaction to Enron — if we would simply repeal it, they think 70 percent of the problem would go away. That's $500 billion of the bailout would disappear.
Second, I have no problem with the workout. We'll let you work out your bad debt. But I am deeply opposed and I will actively oppose any bill which has the Treasury buying bad paper because that's a bailout. That's not a workout.
GINGRICH: And I don't think U.S. bureaucrats should — I'm for a solution, not this solution.
O'REILLY: But there has to be a fast psychological play, because now is a critical time and this whole thing could collapse. Now I'm not a macroeconomist…
GINGRICH: Or you could…
O'REILLY: Go ahead.
GINGRICH: You could write both the things I just described, and pass them by 9:00 or 10:00 tonight. I mean, these are not complicated things. These are straightforward.
O'REILLY: All right. Do you agree with me that we have to keep foreign investment in the country, therefore it's a psychological play? Whatever they do on the Hill, it's a psychological play to prevent panic. Do you agree with that?
GINGRICH: No, and I'll tell you why I don't agree with that because of the way you just said it. I mean, I very seldomly disagree with you but I can't help, OK?
The fact is I don't want them to solve a headache by giving us a 20-year cancer. So there are circumstances where I would say no. Do I think it's helpful by Monday morning to have a solution? Absolutely. Do I think we have the right solution? We'd see money pouring into the U.S., mopping up the debt? Absolutely. I'm for the right solution. I'm for it this weekend. I think it can be done. But I have to tell you, when I look at the current circumstances, I would rather have the immediate problems than give the Treasury hundreds of billions of dollars to spend because that will become corrupting. And in the next administration, it will be a nightmare.
O'REILLY: Who, in your opinion, has gained from this mess, if anybody, McCain or Obama?
GINGRICH: Well, Obama gained a lot at the beginning because it was a mess. It was about the economy. McCain didn't handle it very well the first two or three days, and reminded everyone that Bush was president. And they're not happy with Bush.
I think McCain gained dramatically when he suspended his campaign, came back to Washington, shook up the hearings, and began moving things. And I think at the moment, probably it's about break even.
And Friday's debate is really important because I think they go into it in a very, very unusual moment with an enormous amount of attention being paid. And my guess is a fair amount of the debate is going to end up being on finance and the economy, despite the fact that it's supposedly about foreign policy and national security. I think it's a very important moment for both candidates.
O'REILLY: Yes, absolutely a game-breaker for John McCain. He's got to come out — and you know, I think Obama could tread water, come out OK if it was a draw. But I think that McCain's got to win. It will be interesting. That's the big drama. Can McCain beat him?
GINGRICH: That's right.
O'REILLY: All right. Mr. Speaker, always a pleasure. We appreciate it very much.
GINGRICH: Good to be with you.
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