This is a rush transcript from "The Journal Editorial Report," March 22, 2008.

PAUL GIGOT, FOX HOST: This week on the "Journal Editorial Report," don't call it a bail out. What exactly did the government do for Bear Stearns and what are the risks? We explain.

The Supreme Court hears arguments in a landmark gun rights case. Which way are the justices leaning? And why has it caused a rift inside the Bush administration?

Shopping around for a new religion? You are not alone. Just in time for Easter, results of a new survey on faith in America.

But first, these headlines.


GIGOT: Welcome to the "Journal Editorial Report." I'm Paul Gigot.

Was it a bail out? That's what some people are calling the Federal Reserve-mediated sale of Bears Stearns to JP Morgan-Chase this week. At $2 a share maybe it was less a bail out than a Fed-backed fire sale, proving some banks are not too big to fail after all. But the deal did raise new questions about the government shoring up the struggling credit markets.

Joining the panel this week, "Wall Street Journal" columnist and deputy editor Dan Henninger, columnist Mary Anastasia O'Grady and, in Washington, senior economics writer, Steve Moore.

Mary, well, Bear Stearns was worth billions of dollars a week ago. This weekend it sold for $236 million, a measly two bucks a share. Do you think Bears Stearns shareholders think this was a bail out?

MARY ANASTASIA O'GRADY, COLUMNIST: Somehow I doubt it. I think what happened here is the Fed was nervous over the weekend about what would happen to Bear Stearns if some action wasn't taken before the opening on Monday. So they have sat down with all potential buyers, which turned out to be really one person, Jaime Diamond from JP Morgan. And he said, I will take it for $two a share but you have to take this $30 billion in mortgage- backed securities that I don't want to have.

GIGOT: Which are dicey paper, in the current environment.

And do put taxpayers at some risk by taking on the $30 billion — Dan?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Yes, it does. And there is amidst all of this crisis and panic there is a political component. Certainly, what we discussed here is what the Fed tried to do to prevent systemic risks, runs on other banks. But Congress has....

GIGOT: The whole financial system.

HENNINGER: The whole financial system.

GIGOT: Kind of breaking down in a sort of contagion.


GIGOT: That was the real fear, was it not?

When you talked about what the Federal Reserve was about, you would have a shutdown of credit that would seep into the larger economy and hurt all of us.

HENNINGER: That's the Fed's job. Members of Congress are seating there watching this. Remember, this hooked into the mortgage problem as well and the foreclosures. And people like Barney Frank, who are on the Finance Services Committee in the House, are deciding what is our role going to be in this.

I think it will boil down to one thing. The big failure on the street was risk manage: they didn't do a good job of risk management. What Congressman Frank is proposing is something you might call risk supervision. In other words, the Federal government should be in charge of risk management. Since Wall Street did such a bad job.

And you know what? They are going to have a hard time defending themselves against that because they did do a bad job.

GIGOT: Steve, before we get to the point about new regulation, I want to ask you about this issue of how much risk the taxpayers have taken on in the case of Bear Stearns. Do you agree this may have been something that he had to do?

STEVE MOORE, ECONOMICS WRITER: I am not sure I do. When most people think about a bank failure, Paul, they're probably thinking of Jimmy Stewart in "It's a Wonderful Life," where you have the bank run and the people pounding on the door of the Savings and Loan to get their money back.

The point here is that Bear Stearns is not a traditional bank. They are an investment company. So this is new territory, I think, for the Federal Reserve to get involved in, whether you want to call it a bail out or rescue plan, to do that with an investment firm is to suggest that perhaps all investment firms will be protected by the Fed.

GIGOT: Wait a minute, Steve. Carlisle Capital was a hedge fund that went down. That failed. Nobody rescued them. We need to put up some of the numbers here, the losses at Bear Stearns.

Jimmy Cane, the former chairman, lost something like $400 million — the current chairman lost $400 million. An investor named Joe Lewis, an estimated $900 million. I doubt he feels this is a rescue. They have been wiped out here.

You think any other investment banks looking at this will say, yes, I think I want to repeat that experience. I don't think so.

MOORE: I think the problem is you are extending the Fed's layer of protection beyond banks now. and I think the second problem is exactly the one Dan mentioned, which is, if the Fed is going to provide at that level of protection, they are also going to come in and, whether you want to call it supervision, Dan, or regulation, and this is brand-new territory that I am not sure will make our markets stronger. It may make them weaker in the future because of the federal government's involvement in regulating risk.

GIGOT: There was a judgment call here, Mary. They had to balance the risk of this systemic failure against the incentives that Steve talks about. It is a tough call.

O'GRADY: The problem I have with it is not the Bear Stearns portion.

GIGOT: Understood.

O'GRADY: But the $30 billion they take, every other firm on the street is now looking at the government saying, don't you think you could take some of that off our hands for us. And you will get pressure from politicians in Washington, I think Barney Frank, to help the homeowner here, regardless of whether or not they were irresponsible.

And I think the system cannot survive if gamblers get all the winnings and taxpayers pay all the losses.

GIGOT: It would have been better if for $2 a share, if Jamie Diamond had been forced by the government, saying look, sir, you're getting this at a bargain price. You better take the $30 billion in risk securities too.

O'GRADY: Let him pay 50 cents a share, but he should have had to take the whole package.

GIGOT: I agree, Mary.

Still ahead, The Supreme Court hears arguments in a landmarks gun rights case. When we come back, we will tell you which way the Justices are leaning and why the case has caused a rift inside the Bush administration.


GIGOT: The Supreme Court took up the politically charged issue of gun control for the first time in almost 70 years this week as a Washington, D.C. man asked the justices to strike down a local law that prevents him from keeping a handgun in his home.

We are back with Dan Henninger. Joining the panel, senior editorial page writer Colin Levy and, in Washington, columnist Kim Strassel.

Colin, I think our viewers will be surprised to learn the Supreme Court rarely, if ever, has taken up the Second Amendment right to bear arms. What is at stake in this case?

COLIN LEVY, SENIOR EDITORIAL PAGE WRITER: I mean there is incredible amount at stake for the reasons you mentioned, which is because there hasn't been a lot of case law on this, the Supreme Court is dealing with an originalist case, which is they are looking at how to interpret the Second Amendment.

GIGOT: What did the founders really mean by the Second Amendment?

LEVY: Exactly. The question is whether or not it represents an individual right to bear arms or a collective right to Bear arms in the case of the militia. That's the first part. That's the part about the Constitution.

The second pat is the court has to decide once that right is established whether or not the D.C. gun law represents a reasonable burden on that right.

GIGOT: That's a total ban of handguns in the district.

LEVY: A total ban.

GIGOT: Whether it is a reasonable regulation under than amendment.

LEVY: Correct.

GIGOT: So there is a lot at stake. They will decide if the Second Amendment is really the right to bear arms and how extensive that right is.

LEVY: That's right.

GIGOT: Kim, you followed the Supreme Court argument. What did you make of it? Where are the Justices leaning?

KIM STRASSEL, COLUMNIST: It was really clear from the beginning — and I think it surprised people given how much emotion there was about this case. The five conservative justices on the court made pretty clear right away that they were on line with the individual right. There is a lost of fascinating discussion about the historic question of this and the framers' intent. But the five made clear through questions this was something they believed.

Most of the discussion instead turned to what Colin was talking about, which is, if this isn't an individual right, what regulations, if any, can the government bring to bear. And that will be the meat of any decision.

GIGOT: I think I know where you stand, Kim. You think it is an individual right.

STRASSEL: Oh, yes. I think for gun owners, gun rights people out there, one of the more encouraging things about this case is it sounds as if justices lend to the opinion that maybe you couldn't have a lot of regulation if this is something protected in the Bill of Rights as an individual right.

GIGOT: My reading of the argument, Dan, is as many as seven Supreme Court justices would find some form — would find this is in fact an individual right. I heard their by-play at the Supreme Court, which would be a big number.

HENNINGER: I think I agree with that. Most people probably can't quote the Second Amendment, but they do know what this is about. It is about gun control, right? The issue that's been kind of at the center of our politics for two decades.

Well, it turns out they thought Justice Kennedy might have been a swing vote here. It turns out when it was his turn to talk mainly what he was asserting is the American people have a right of self-defense. And what he meant was you have a right to defend yourself in your home.

Now, I think this goes to the heart of the matter because the gun control advocates, it isn't that they are against guns. they are against the idea of kill. Guns kill people. And there is simply no way the two sides are ever going to be able to come to terms. But I think the idea of gun control is going to die with this decision.

GIGOT: What about this debate inside the Bush administration, Colin. Dick Cheney took a position that as at odds with a formal brief filed in this case by the Justice Department.

LEVY: Right. That was the issue. Paul Clement basically....

GIGOT: Who is the solicitor general in the Justice Department.

LEVY: Out solicitor general — gave a reading suggesting that there - - that more gun control, in essence, be allowed. While there was an individual right, that more gun control — there be more room for reasonable gun control.

Vice President Cheney wrote an amicus brief, along with 300 members of Congress who signed it, basically believing in a broader individual right, so more substantive reading of the Second Amendment.

What's interesting here is John McCain was one of the signers of the Cheney brief. And in an election season, this is a really good opportunity for Republicans to remind voters how important this Supreme Court is, especially when it comes to constitutional issues.

GIGOT: Kim, there was a suggestion somehow in the people who wanted to defend the D.C. statue that if you found this individual right in the Constitution, it would allow anybody to own machine guns, bazookas, tanks, any kind of ammunition at all. Do you think that's a reasonable argument?

STRASSEL: Well, that's what is going to be the heart and soul of this debate. That discussion came up so much in this oral argument. One of the things that Paul Clement, the solicitor general, was concerned about — he got a lot of push back — one of the reasons the Bush administration had this odd kind of split, the baby argument, was that they were getting push back from their national security people saying how can do we deal with machine guns.

GIGOT: But, Kim, is this a fair reading of the D.C. circuit opinion that the Supreme Court is ruling on, that it would open up all of these — it would open the world to this high ammunition dangerous weapons?

STRASSEL: No, the appellate court didn't go that far. That was a bit taken out of context and, you know, I think, put a spin on it to make it sound as if all terrible things would happen.

GIGOT: Just normal weapons in the hand of people that have, traditionally, handguns or rifles, that sort of thing.

OK, we've got to go.

STRASSEL: That's what the debates were about.

GIGOT: OK, Kim, thanks.

Just in time for Easter, a new survey on religion in America. Which denominations are losing members, which are gaining? The answers may surprise you.


GIGOT: As Christians across the country prepare to celebrate Easter, a new survey by the Pew Forum on Religion in Public Life reveal surprising facts about the American religious experience. Perhaps the most striking finding is that almost 44 percent of American adults have switched religious affiliations at some point.

We are back with Dan Henninger and Mary O'Grady. And joining the panel is "Wall Street Journal" deputy taste editor Naomi Schaefer Riley.

Naomi, what do you make of this figure that almost half of adult Americans have switched affiliations? Are we that fickle about God?

NAOMI SCHAEFER RILEY, DEPUTY TASTE EDITOR: Certainly, there is a tendency in our culture to shop around for different faiths. There is a stereotype that people are Hindu one second, Buddhist the next and experimenting with meditation. but if you look closely at the figures that's not the case. One-third of those conversions are actually from one Protestant denomination to another.

GIGOT: Still Christian.

RILEY: Still Christian and still Protestant, a smaller category. It runs out only 51 percent of American now are Protestant.

GIGOT: We could soon be a Protestant-minority nation. Hard to believe.

RILEY: That's right. It is an incredible factor.

HENNINGER: Well, I'd like to extend Naomi's point and say shopping around is the spirit of our times. You have a fellow running for president, Barack Obama, running on change. Most people don't know what change means.

GIGOT: Especially from Barack Obama.

HENNINGER: Right. It's like the web, everything has to be changed quickly now. People go from one thing to another. I truly believe it has touched religion. People say I am tired with this religion, I will try another one.

GIGOT: A marketplace of religious experience, Mary?

O'GRADY: I think there is an advantage to this. That is, when you have competition, you have a more dynamic market. If you look at, for example, Latin America, where the Catholic Church dominated for a long time and had a link with the state, you have a much less dynamic environment for religion. I think the opportunity with religions, having to compete actually, is a good thing for the spirituality of the country.

GIGOT: Naomi, what are some other lessons here. Is one of them religious tolerance? That Americans we believe in one true God or say we do that is our faith but we give a pretty big pass to people who believe in somebody else's God.

RILEY: We do. There is a human amount of religious dives at this in this country. One other point to make about the conversion statistic you quote there is that conversion is unheard of in a lot of the rest of the world. If you tried to convert, you might be beheaded in some parts of the world. In some places it's, well, if God didn't choose you, how could you choose a different God. That's also an interesting point.

You know this is a huge survey. There is a lot...

GIGOT: 35,000 people.

RILEY: 35,000 people were surveyed. Pew will look at this stuff the next several years and bring us interesting findings.

One thing that I think some people have pointed out also is the fact that there are a growing number of unaffiliated people in this country. I think a lot of our nation's atheist have looked at this and applaud it. And it turns out actually only a very small percentage of those unaffiliated people are actually atheists. Many say they like religion. They are sort of they believe in God generally, but they haven't picked a church.

And if you look at really where the biggest numbers there are coming from, they are 18-29 years old, who tend to be the most kind of unaffiliated. They are looking for things in their life.

GIGOT: Among the religions, who is gaining and who is losing?

RILEY: The churches interestingly gain the most. I think this is interesting, related to the point about shopping for churches, people are not looking for easy churches to belong to. They are not looking for ones at that require the least of them. They are looking for ones that have strictest theologies, the most standards when it comes to your sexual behavior and also to other kinds of community standards. And Americans think, oh, well, people are looking for the easy way out and the bargain when it comes to church shopping. But that doesn't seem to be the case.

GIGOT: Inside the Catholic Church, the Catholic Church lost some its members born into the church. A lot of those people are no longer affiliated, but they are gaining among immigrants and Hispanics, which leads to a certain younger dynamism within the Catholic Church but a changing demographic, ethnic component.

RILEY: Yes. There is a parallel here with the southern hemisphere being the part of the world growing most in terms of Catholicism and religion generally. And it's appearing in America.

GIGOT: Thanks, Naomi.

We have to take one more break. When we come back, our "Hits and Misses" of the week.


GIGOT: Winners and losers, picks and pans, "Hits and Misses," it's our way of calling attention to the best and the worse of the week.

Item one, Starbucks gets a make over — Dan?

HENNINGER: Starbucks isn't a way of life. It is a corporation.

GIGOT: No kidding.


HENNINGER: Whose share price lately has been as flat as used coffee grounds. They will get a make over. To me, the most interesting aspect is they about the a small coffee company with only 11 employees, who apparently make this mass market coffee machine that can extract flavors no one knew existed in coffee. They will start offing rare coffees like Ethiopian and Guatemala.

To me, this is amazing. Coffee was scoffed in Ethiopia in the 9th century. Now 11 centuries later the market will force Starbucks to draw these extraordinary new flavors out of coffee. Personally, I can't wait to try my first cup of Grande Latte Urgechechy (ph).

GIGOT: And pay four bucks for the privilege.

OK, next, a hit to former University of Colorado President Hank Brown — Naomi?

RILEY: Yes, earlier it this month, University of Colorado President Hank Brown stepped down from his position. He has only been in it for about three years now. In that time, the man has managed to do what basically no other college president has managed to do. He, well, first fired Ward Churchill. A lot of people would have liked to do that. He managed...

GIGOT: The professor who said anti-American things.

RILEY: Yes, after 9/11. He managed to fight grade inflation, made the university more accountable to taxpayers. He managed to clean up the athletic department, which was involved in a sex scandal when he took over.

So I say, in this man's three years, he has done amazing things. And we should send him to Harvard next.

GIGOT: All right, thanks, Naomi.

Finally a hit, sorts of to the National Archives — Kim?

STRASSEL: That's right. A very qualified hit to the National Archives, which finally — all these years after the Clintons left office, finally released the first papers of Mrs. Clinton's time there — her public schedule in this place.

Now the thing is, there has been all kinds of controversy about why it has taking so long. Critics suggest the Clintons are meddling in this. The Clintons say the archives are moving slowly.

Whatever the reason, the reality is that there are millions of primary voters who have not yet seen documents that would help judge Mrs. Clinton's claims that she got experience in her time there or to help deal with the controversy. The real measure of this will be whether or not the National Archives continues to keep releasing the records.

GIGOT: All right, thank you, Kim.

That's it for this week's edition of the "Journal Editorial Report." Send your e-mails to jer@foxnews.com and visit us on the web at www.foxnews.com/journal.

Thanks to my panel and to all of you for watching.

I'm Paul Gigot. Happy Easter. We hope to see you right here next week.

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