This is a rush transcript of "Special Report With Bret Baier" from April 22, 2010. This copy may not be in its final form and may be updated.


PRESIDENT BARACK OBAMA: There is a legitimate debate taking place about how b est to ensure taxpayers are held harmless in this process. And that is a legitimate debate, and I encourage that debate.

But what is not legitimate is to suggest somehow the legislation being proposed is going to encourage future taxpayer bailouts as some have claimed. That makes for a good sound bite but it's not factually accurate.


BRET BAIER, ANCHOR: President Obama pitching his financial regulation overhaul at Cooper Union College in lower Manhattan today as the Senate, the Senate Majority Leader Harry Reid says he is plowing ahead no matter what toward a vote on financial regulatory reform. And the Senate minority leader Mitch McConnell saying shouldn't we understand what is in this? There are a lot of potential consequences for small banks and lending institutions. Let's take our time to reach a bipartisan agreement.

That is what we're dealing with. Let's bring in the panel, Steve Hayes, senior writer for the Weekly Standard; Mara Liasson, national political correspondent of National Public Radio; and syndicated columnist Charles Krauthammer. Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I am glad you played the package from the president's speech. We knew what the content was, but I was intrigued and appalled by the tone of the speech and the rhetoric in the sound bite.

The way, and he has done this before — he tries to denigrate, cast- out, and de-legitimize any argument against his. And here he is talking about that it's not legitimate even to suggest that the bill he is supporting might encourage a bailout. It's certainly possible there had been strong, very good economists and others who have argue because of the provisions in the ball, and one in particular, where a treasury has the right to designate any entity, private entity a systemic risk and then to immediately, even without Congress approving and appropriating money to guarantee all the bad loans, that is an invitation to a bailout.

Now the president could argue otherwise, but to say that to raise the issue is illegitimate is simply appalling. What he is doing here is he is making a lot of provisions that will be changing a very complex financial system. At least have the intellectual honesty to admit you can't predict all the outcomes. The president has a tick in which he presents himself as having this sort of academic, reasonable discourse, but it really has inside of it a sharp edge of partisanship. He won the presidency. That gives him a big house, a lot of power, and a fabulous airplane, but does it not make him the arbiter of American political discourse.

BAIER: Mara, we talked about how it's a tough issue for Republicans to push back on. And Republicans are saying, hey, listen, we want financial regulatory reform but we want to do in a bipartisan way that takes our time, and it's a 1,500-page bill. Let's go through this.

MARA LIASSON, NATIONAL POLITICAL CORRESPONDENT, NATIONAL PUBLIC RADIO: I don't think Republicans are actually saying we want to kill the bill. There are two things they are doing that are not completely consistent, but they are trying to negotiate. Mitch McConnell says over and over again he thinks we can get a deal.

BAIER: Senator Shelby says he's very close, from Alabama.

LIASSON: Yes. At some point, either Shelby and Dodd have a deal or the Republicans put amendments on the floor that they can get, that they can pass or certainly have the votes to block parts of the bill if they want to filibuster it.

I actually think that the argument being made that this bill does not solve the too big to fail problem is a legitimate argument. I haven't heard the Republicans proposing a solution. One way it solves too big to fail, if you are too big to fail, you're too big, and do something about that. But I haven't heard a solution to that from the right.

Certainly from the left there is. Some people say the big banks should be broken up.

BAIER: But Republicans say if you don't deal with the core of the bill it's going to be tough to amend on the floor with 41 votes. You need the 19 Democrats to sign on to the deal.

LIASSON: There is no doubt a political game is being played and the Democrats think they have the upper hand. But it's also true that Senator Dodd did spend a lot of time and would like a deal with Shelby or Corker or whoever it is to do this.

BAIER: Steve, we talked about the tone in the speech. Here's another little clip from President Obama's speech today.


OBAMA: Unless your business model depends on bilking people there is little to fear from these new rules.


BAIER: He's talking to a Wall Street crowd. There aren't too many business models built that way.

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: What he is trying to do is suggest that the problems we saw that manifested themselves in the collapse or near collapse of our economic system are far more widespread than we think they are. That's not to minimize the problems we saw as a result of them.

I think his speech was an incredibly cynical speech, and one reason I think it was is he called for an end to cynical politics. And then he did exactly that. He talked about not having specialists and not giving favors to people. He suggested that the Republicans were in bed with Wall Street, once again. We've heard this rhetoric before.

What the bill does in effect in some cases is enshrine exactly those politics by giving gifts to organized labor. You have got these provisions where the labor gets a proxy, they get a say in executive compensation. You've got a specially designated position for labor to come in and work the negotiators, one thing after another.

This is sort of a give-away to big labor, at least in some of its provisions. I think he has to explain that.

BAIER: With a 1,500 page bill, as we saw with the health care bill that was more than 2,000 pages, potentially there are unintended consequences in the middle of there.

HAYES: There is no question there are unintended consequences. That's one reason I think Republicans want to slow this down. But I agree with Mara that ultimately most Republicans want to be on board with some bill in part because they are afraid of politics but also because they agree with some limited regulations on these things.

KRAUTHAMMER: As the speaker of the House said about the health care monstrosity, once you pass it you'll discover what is in it. That's what this is. If you have a bill this size about regulatory reform, we're going to be discovering stuff in it, some intended like the goodies to the unions, and some unintended for months. It's very unwieldy.

And the president is doing exactly what he did in the summit he had with Republicans over health care in which whenever they would raise an objection he would rule it out and say there are legitimate arguments over this, however, that's a sound bite or talking point, as if he never engages in that.

This kind of partisan rhetoric where he refuses to accept the legitimacy of those who argue against, which I think is distressing in a president, and particularly one who paints himself as he did in 2008 and does today as a man who stands above the partisanship and all the pettiness and all the special interests.

He is a politician like all of us, and when he pretends he hovers above the fray like a neutral arbiter, it's grating.

BAIER: Mara, Senator Reid and Senator Schumer said time has run out. We need to move fast, we need to move now. Republicans say we're on a bipartisan track. What about the politics of this?

LIASSON: First of all, although Democrats feel certain this is an issue the public is on their side, Wall Street is so unpopular, Republicans don't seem that worried being tarred with the accusation they're on the side of the big banks. I think it's possible you get a filibuster vote where it worked once.

BAIER: To head back to negotiations.

LIASSON: Yes, head back to negotiations. But something has to come up to get a couple Republicans or at least one to vote for the bill.

HAYES: That could be useful for Chris Dodd as he goes back to work on the House and Senate and come up with a compromise.

BAIER: Be sure to log on to our homepage at foxnews.com/specialreport. Vote for your topic of the week for tomorrow's lightning round.

Coming up, is the administration trying to take over the country's waterways?



REP. JAMES OBERSTAR, D-MINN.: I know what it means. And it's the purpose of this act to establish and maintain the chemical, biological, and physical integrity of the nation's waters.

REP. DOC HASTINGS, R-WASH.: It potentially puts government in charge of all waters including mud puddles and irrigation ditches. If you take "navigable" in this bill, it could potentially lead to the federal government usurping state laws as it relates to water and regulating therefore mud puddles. I just think that's bad policy.


BAIER: Well, in 2001 the U.S. Supreme Court ruled there are regulations, limits to what the EPA can and regulate, because in the 1972 Clear Water Act, the word "navigable" was in that particular bill that became law. Now there is an effort to take that word out, "navigable," and there are some potential consequences to that.

HAYES: The important reason that "navigable" was so crucial to this entire debate from 1972 to 2001 and more recently with the Oberstar measures, two of them, is that it enabled the people who were pushing the regulation of these waters, these navigable waters, to take this from state to federal jurisdiction by, in effect, using the commerce clause.

They're saying that the commerce clause allows federal government to regulate these thing things because they're navigable waters and they could be used for commerce.

By taking that out, you are essentially saying anything goes. The language in the original Oberstar bill said we can regulate all waters. That language has been stripped out. And the proponents of that bill say we didn't really mean that. We were looking for something far more limited. We just want to restore the clean water act to meaning from 1978 to 2001.

The problem is there is nothing that says it in the text of the language. So Oberstar says if it was not regulated before 2001, it will not be regulated with the enactment of this legislation. It's nice he said that for the legislative history, for the purposes of legislative history. It's not at all clear that that will actually be the way it's carried out once it's in the hands of federal bureaucrats.

Doc Hastings, it sounds like he is being hyperbolic when he says we would regulate mud puddles, but there is nothing to keep the federal government from regulating those things.

BAIER: We heard politicians say words matter, but when it comes to writing specific law, words really do matter.

LIASSON: Words matter. What Oberstar's job now is take the intent, which he just described, and put it in legislative language so there is no question that nothing is regulated that wasn't regulated before 2001, period.

I'm sure they can do that. It does push the takings buttons of conservatives because it sounds scary, but he does have a Republican cosponsor and they should be able to work it out.

BAIER: Charles?

KRAUTHAMMER: It pushed mine, that's for sure.

Words mean something. In 1972 even liberals had respect for constitution. They understood if you want to regulate the waters by the feds you have to say "navigable" so it will be under the commerce clause. You take it away, and how do you explain why the feds ought to regulate un-navigable waters?

Doc Hastings is right. You can expand this to apply it to every sinkhole, mud hole, swim hole in America. Probably they'd exclude potholes to leave it in the jurisdiction of locals.

But there is — a statement by Oberstar which would establish legislative intent is not protection against encroachment of the federal government against our rights. Our protection is the Constitution.

I don't know how you explain it under any interpretation of the commerce clause. A pond in a guy's field is not interstate commerce. I don't care if a bird lands on it and then it ends up in another state, which is how liberals want to interpret it.

BAIER: The potential onerous effect of that is to have the EPA regulating those small waters, pond, mud hole, whoever.

KRAUTHAMMER: It means it's unlimited. And it even has a provision that says and "the land that impacts it" so it could regulate not only the water but everything around, meaning every square inch of the United States.

This is an EPA that unilaterally decided it will to regulate CO2 giving it total control over our energy economy, and now it wants all control over waters. And is there not an iota of respect for the federalist structure of the country?

BAIER: Are these fair questions?

LIASSON: Yes, they fair questions, and they need to be answered and figured out. As I said Oberstar says that is not his intent. Now he has to write a bill that reflects that.

HAYES: If this were to pass and become law you talk about not only expanding the meaning of Clean Water Act of 1972 but expanding what the commerce clause is. If the court comes in and finds the new law is constitutional, which, you know, given judge shopping and the way the bench is trending, is not a stretch, you can make this a meaningless provision of the Constitution.

BAIER: There will be, I guarantee you, no other news organization that covers this particular aspect of this bill. But in the overall umbrella of concern about federal power grab, this fits into the narrative.

KRAUTHAMMER: It's also in the individual mandate in health care, which is also excused away or under the commerce clause which I think will be a brand new, novel, original, and incorrect interpretation.

The liberals understand they have a window of '09 and '10 that they have all of the power now and they'll lose it after Election Day, and they want to expand the strength of government in unlimited way as long as that window is open. And they are doing it, here as in health care.

BAIER: That is it for panel. But stay tuned for, well, I can't explain it. Just stay tuned.

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