This is a rush transcript of "Special Report With Bret Baier" from March 26, 2010. This copy may not be in its final form and may be updated.


JOHN COURSON, MORTGAGE BANKERS ASSOCIATION: It allows borrowers to have a num ber of months, in this particular case, three to six months of forbearance of their payments while they're trying and seeking reemployment. And then once they get reemployed, then they can become eligible for a modification of their mortgage.

SYLVIA ALAYON, CONSUMER MORTGAGE AUDIT CENTER: To put a temporary stay on a foreclosure, and that person is unemployed three months or six months down the road, we're just going to be back at square one.

JAMES FREEMAN, THE WALL STREET JOURNAL: What you are basically doing here is taking the risk, the losses in the future and moving them over to the taxpayer ledger. This is a huge cost.

They are saying — they are only talking about the $50 billion from TARP, but this is going to get bigger because the losses are going to hit the FHA over the years.


BRET BAIER, "SPECIAL REPORT" HOST: The White House announcing they want to spend $14 billion of the unspent, if you will say that, bailout funds for jobless homeowners to free them up from their monthly mortgage payments for up to six months, also help them rework their existing mortgages and provide some additional money, federal help to work loans over for the 10 million homeowners who are essentially upside down in their mortgage. Their home is — their mortgage is more expensive than their home, the value, their house is worth.

Let's bring in our panel about this, Steve Hayes, senior writer for The Weekly Standard, Juan Williams, news analyst for National Public Radio, and syndicated columnist Charles Krauthammer.

Steve, the White House tried once with this foreclosure relief effort. This is a second try at this. Obviously it's a serious problem. There could be 4.5 million homes in foreclosure this next year. But what about this effort?

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: Well, it's interesting. You know, we were talking the other night in the context of health care reform that intervention begets intervention. I think we have seen that in this episode in spades.

It was interesting to see Neil Barofsky, who is the special inspector general for the TARP which oversees all of this say that one of the problems, he really blasted the administration for setting this up the way that they did, saying it was a ready, fire, aim approach to the problem.

But one of the real problems he said was that this is not going to be helping the people it was intended to help. I think there is a second problem here that particularly concerns this HAMP — I forget — the Home Affordable Modification Program.

And I think people when they look at some of the details of this are going to be not happy with who is eligible for help with their problematic mortgages.

Keith Hennessy was an economist in the Bush administration did an analysis to show that some people who have mortgage balances of $700,000 and make $185,000 a year are going to be eligible for assistance under this program, which, in effect, is, you know, asking some taxpayers who may have been responsible to write off the losses or the bad investments of some people who may have been irresponsible.

So you're lumping in people who actually need this because they had got involved in bad mortgages with people who have made bad investments and you are having the taxpayer underwrite those.

BAIER: Juan?

JUAN WILLIAMS, NEWS ANALYST, NATIONAL PUBLIC RADIO: I take a different view, which is that the entire economy, in addition to people who have faithful and were paying their mortgages all benefit when we don't have houses going into foreclosure or collapsing, because that drives down the value of all of our homes.

And so I think that's the attitude that you are seeing employed here, beginning with people like Ben Bernanke at the Fed who seems to be endorsing this kind of policy, this kind of action.

So you get Bernanke, you get Geithner, the people, Larry Summers, the people who are setting economic policy for the president and the administration saying there's a larger picture here in which the economy has to remain in good stead.

And remember, you are talking a huge number of people who have mortgages in just the situation as Steve was describing underwater or where the mortgage is worth more than the house. And if all those people go belly up, it impacts all of us and it gets us back into a housing bust that could, again, have a difficult or negative consequence for the overall economy.

BAIER: And the Mortgage Bankers' Association makes your very point about the cost of foreclosures across the board.

However, for the person who has been scrapping it together to try to make the mortgage payment and has done it effectively, and yet the neighbor overreached and can't now make the payment, for the person who is scrapping it together and doing it right, there is a feeling of unfairness, correct?

WILLIAMS: There might be a sense of unfairness. Again, that's the immediate kind of response, Bret. But I think that you have to say, well, wait a second, I don't want my property that I had been paying on, my hard work now to go for not because this guy's property goes into foreclosure and then the whole neighborhood starts to sink.

BAIER: Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I think that's the nub of the problem which you can't really solve. It is unfair, but it's also necessary.

It's exactly unfair for the reasons that we heard. You pay your mortgages. You have two jobs. You scrape and you get by. And the guy next to you who takes a vacation, skiing in Aspen, and spends it on all kinds of stuff, he gets assistance through the program where you use the TARP funds to give the banks incentive, i.e. cash, to give you a break on the mortgage and to actually reduce ,to cut down the actual value of the mortgage.

On the other hand, Juan's right. I mean, if you have a foreclosed house, it's abandoned. It costs the bank $50,000 to deal with it and it blights the neighborhood, and it reduces the equity on your house, the guy who has been working hard to pay it off. So overall you have to do something.

The problem is you can only help the margins. The reasons we are having a new program now is because the old one hasn't actually helped a lot of people. What you have, I think, is the compulsory program, which is the unemployed. They get a six month break, which will probably help a few folks who get a job, but obviously it's not going to help those who are still unemployed at the end of the six months, and the voluntary program, where you give the banks incentive.

Overall, it isn't a bad idea. What it will probably do, it will make the housing recession shallower but longer, rather than steeper and shorter.

BAIER: Like you won't find the bottom?

KRAUTHAMMER: Exactly, because, if the government laid hands off, you would have a crash. You would have excess of houses. Houses would be so cheap they would begin selling again. But, in this economy you don't want a risk of V-shaped collapse like that.

BAIER: And Steve, why will this program, do you think, be different than the first one where fewer than 200,000 managed to rework their loan? Is it because the White House thinks that the problem has exacerbated since then?

HAYES: Yes. I think they think it's more acute. But there is another problem that you layer on top of this, and that is that this program could be a victim of its own success. If, in fact, you have that many people who buy in, who participate in the program, it could actually exacerbate the very problems that it's trying to fix, just as the first program did.

So, you know, it may actually solve the short-term problem and exacerbate the long-term problem, which really, I think, could have a negative impact on the economy. If there is a further downturn in housing, then you have all of these people in these new government-backed loans. The housing values plummet, and the government is left holding the bag, the taxpayers are left holding the bag on those.

BAIER: And Juan, quickly, the underlying issue here is unemployment and jobs and people being out of work. That's the underlying issue.

WILLIAMS: There is no doubt about it. Today I was talking to some administration officials who said that's their big fear, long-term unemployment.

BAIER: We'll see how the housing crunch is playing in southern Spain. It's a Web exclusive report on our homepage, Foxnews.com/specialreport.

Next up, the winner of your choice online topic of the week in the Friday lightning round.


BAIER: Well, every week on our website, Foxnews.com/specialreport, viewers vote on what we should discuss first during this, the Friday lightning round. This week, Charles Krauthammer's wild card pick was the clear winner. There he is, the wild card. So, what's the wild card pick, Charles?

KRAUTHAMMER: Well, first, I want to say how, again, humbled I am.


I have a prepared acceptance speech, but in the interest of time I will dispense with it.

BAIER: Thank you.

KRAUTHAMMER: Wild card question, leaving out the obvious winners Obama and Pelosi, who are the big winners and/or losers in the health care debate?

The correct answer is big loser, Bart Stupak playing way over his head in the big leagues. He wasn't prepared. He couldn't stand the heat in the kitchen. He ran out screaming, waving a useless executive order.

The big winners are the young guns in the Republican House, Eric Cantor and Paul Ryan. Ryan is the king of wonk, and Cantor was an excellent spokesman, a defender of truth, justice and the American way.

BAIER: Juan, winners and losers?

WILLIAMS: I think the Tea Party movement was a big winner in this health care debate. I think you wouldn't have had town hall meetings. You wouldn't have had the need for people to rally in Washington. I think Sarah Palin and the whole argument about is president Obama socialist, are there going to be death panels — the populist injury that has now become vested in the Tea Parties is largely borne out of the year long plus struggle we have seen over health care in this country.

I would also say Jim Clyburn was a whip in the Democratic side, really I think he rose his stock in the course of this.

And finally, Ted Kennedy. I saw the other day where Patrick Kennedy went out to the graveyard and put a sign down next to the plot that said, you know, "We finally got it for you." and I think Ted Kennedy's legacy now is cemented as opposed to what was going to happen after you saw Scott Brown's victory.

BAIER: So you are all winners. You have got no losers?


HAYES: I think the winner is a guy named Dr. Dan Benishek, who is the challenger to Bart Stupak in Michigan, the guy who had a Facebook page, didn't have his own Web site. He's the Republican challenger. He had a Facebook page with just 700 fans before the Stupak flip, now has 22,000 fans and has gotten tens of thousands of dollars in contributions. So he is the big winner.

The big loser, I have thought about this throughout this entire debate, are current medical students. What have you done if you have taken out hundreds of thousands of dollars in loans to go into school for an extra six, eight, ten years to become a doctor, and you find out in the middle of, you know, last Sunday, that you're going to be a government bureaucrat some day, potentially?

BAIER: All right, next topic, Iraq elections. A surprise today, the final results came out. And Ayad Allawi who ran on the secular ticket won more seats than the current Prime Minister Nouri al-Maliki. It's not yet clear whether Allawi can pull off forming a coalition government and take over the prime minister's seat, but this was surprising, Charles.

KRAUTHAMMER: It's also the most critical moment in the history of Iraqi democracy. Can there be a peaceful transfer of power? Maliki has been speaking threateningly about using the army or calling out the mobs in order to stop Allawi. If he does, this will be a very difficult day for us and a huge setback for any chance of democracy in Iraq.

BAIER: Juan?

WILLIAMS: There has been no sign of fraud that the U.S. has detected, so the U.S. is saying, wait a second, you have to abide by the results. Maliki on the other hand says he wants to challenge the results. There is no basis for challenging the results.

So then we come back to what Charles was discussing — by the way, I thought that card looked like a wild card joker more than anything else.


But, anyway, we come back to what Charles was discussing, which is will he use violent means to try to maintain power?

BAIER: Steve?

HAYES: I think there are both very heartening things and very concerning things. The heartening thing is that Allawi ran as a secularist. He is a Shiite, but he ran as a secularist, and he ran largely by appealing to Sunnis. So here you have some four years after what we thought was a civil war, an ethnic — a Shiite running, appealing to Sunnis as a secularist. That's encouraging, the fact that he could win.

The discouraging thing or the worrisome thing I think is the implications of putting together this coalition government. I think the Obama administration really needs to think about extending the stay of U.S. troops there if they need to.

BAIER: OK, quickly down the line, one minute left. John McCain welcoming Sarah Palin to Arizona today to campaign. Steve?

HAYES: Well, it was fascinating seeing her there in the leather jacket and talking about the "lame stream media." I think everybody had flashbacks to 2008.

BAIER: Juan?

WILLIAMS: He needs her and he needs to reinvent himself. Apparently he is leaving behind the old John McCain. I'm not sure everybody is going to be so crazy about it, but it will probably get him by J.D. Hayworth.

BAIER: He's challenged from the right by J.D. Hayworth, a former congressman.

KRAUTHAMMER: Poetic justice. He created her. She now is in Arizona trying to save him. It's the happy ending to a May-December romance, and it appeals to the romantic in me and I think all other Republicans and conservatives who have a heart.

BAIER: And you don't mind the card, do you, when you win?

KRAUTHAMMER: Oh, no. I think it's an expression of irony and a break in the action in the serious.

HAYES: When you win.

BAIER: When you win.

HAYES: He wins every time.

BAIER: I run a clean race.


WILLIAMS: I'm going to quote O'Reilly who has that picture of you and said he want to know if they ever call you Chuck. Dr. Charles is the way we refer to you.

BAIER: That's it for the panel. Maybe you will win next time, Steve.

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