This is a rush transcript from "Special Report," December 16, 2011. This copy may not be in its final form and may be updated.


ROBERT KHUZAMI, SEC DIVISION OF ENFORCEMENT DIRECTOR: Today the SEC has charged six former top ex ecutives of Fannie Mae and Freddie Mac with violations of the federal security laws. In its annual report for 2006, we allege that Freddie Mac misrepresented to the public that the subprime holdings were not significant. In fact the company's actual exposure was between $141 billion and $244 billion. That is about 40 to 70 times greater than what it told its investors and the investing public.


BRET BAIER, HOST: The Securities and Exchange Commission, the SEC charging six former top executives of Fannie Mae and Freddie Mac with securities fraud, accusing them of telling their investors, misleading investors, about how many high risk loan they held, which many say led to the current housing crisis. We are back with the panel. Start there. Fred, big deal?

FRED BARNES, EXECUTIVE EDITOR, "THE WEEKLY STANDARD": This is a big deal and further evidence of what was at the root of the housing crisis and the economic collapse and the packaged loans, the subprime loans. Fannie and Freddie were right there. Wall Street played a big role, too. But a lot of interpretations of what was cause were it was all Wall Street. It wasn't all Wall Street. It was partially Wall Street and partially Fannie and Freddie and this is further proof of it.

BAIER: Juan?

JUAN WILLIAMS, FOX NEWS POLITICAL ANALYST: The ratings agencies are in that, too. So a lot of people have guilty hands.

But it's interesting you are finally seeing the SEC take action. A lot of people thought why do the Wall Street guys and bankers get away scot-free. It's time for somebody to pay a price. It's very interesting they decide now the is time.

I wonder if that is political, I got to tell you. I don't know if the Obama administration decides there is some political advantage to doing it at this point. This has been sitting there for a very long time and obvious to everybody. But you are having now to go back against some of these officials that are long gone from Fannie and Freddie. There is no question they were misleading people and underestimating the subprime mortgages they had in hand and refusing to acknowledge it to investors.

BAIER: David, Juan mentions the politics here. Obviously the issue of Fannie Mae and Freddie Mac came up in the debate last night and the exchange between Congresswoman Bachmann and Speaker Gingrich. Does this affect that environment, that equation?

DAVID DRUCKER, REPORTER, "ROLL CALL": Potentially. Because we're two-and-a-half weeks from voting I think this could be problematic for the speaker because he has not yet figured out a way to talk about this in a way that makes Republican primary voters comfortable. They're very concerned about crony capitalism and the idea of government being involved in things they shouldn't be. It's becoming a bigger deal in Republican circles than it has been in the past. And so this does not help him to have this out there in the news. And it can prod his opponents to go after him about it.

BAIER: I want to turn topics. We didn't do a Friday lightning round, but this will be sort of a Friday lightning round. The Keystone pipeline is in the payroll tax cut extension as it stands now. Today the House approved an omnibus spending bill, averting a government shutdown. The Senate still has to act. Fred, what about the Keystone pipeline back and forth and what Republicans have managed to do here?

BARNES: They have managed to outwit Democrats, particularly President Obama. This is a terrible issue for President Obama. One, it show he is vacillating and weak and can't make a decision when he could have made the State Department first approved the pipeline a couple of year ago. It's also a jobs program. It will produce -- people dispute how many jobs, but nobody says it won't produce a lot of jobs. And the president is supposed to be for that. And then it's an energy thing, bringing all this oil from a secure, friendly neighbor, from Canada. To be against it or want to delay it is very bad for Obama. That's why he had to cave on this.

BAIER: So Democrats not playing the hand well up there on Capitol Hill?

WILLIAMS: They were outmaneuvered on this one because if the bill passed in the House with Keystone in it, the Senate is in a position where they have to approve it. Let me just say Fred just painted you a very sunny image of Keystone pipeline, because you even have the Republican governor of Nebraska who had objections. He's subsequently said yes he'd like to see the pipeline because he wants the jobs. Everybody wants the jobs.

BARNES: They changed the course of the pipeline in Nebraska.

WILLIAMS: They've changed the course, but they have to study it. Environmentalists have a legitimate point. Let's look and see what is going on. You can't just damage and force this thing. You know what, I think as part of the deal the Republicans are going to get their wish. The pipeline will go through. We'll see about the environmental damage. But from the president's perspective I don't think it was totally irresponsible for him to say let's look at it and make sure we're not damaging the environment.

BAIER: He did come out and say don't put this together. Don't put these bills --

WILLIAMS: Don't attach it.

BAIER: They did.

WILLIAMS: Now he is caving on that point.

DRUCKER: Yes. The president has a habit of doing that and caving when it's totally unnecessary. If he would have signed off on this, the unions would have been happy, he would have had a job creating thing to tout. And the Republicans wouldn't have had this. Here it was hanging out there for him. It was extremely smart to go after it because you have a lot of Democrats who have been very publicly for it, the unions are for it. And there was no way Republicans weren't going to win on this politically, even if all this maneuvering on Capitol Hill over spending and the extenders fell apart.

BAIER: When James Hoffa and John Boehner are on the same side of the one issue.


BARNES: If the president just approved this a couple of years ago when he could have, you wouldn't have had the environmentalists build up a huge protest against it.

WILLIAMS: Maybe they have a point, Fred.

BARNES: No, they don't. It's been studied to death.

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