CQ Transcriptswire

SPEAKERS: GEORGE STEPHANOPOULOS, HOST

CARLY FIORINA, MCCAIN CAMPAIGN ADVISER

ALAN GREENSPAN, FORMER FEDERAL RESERVE CHAIRMAN

SEN. CLAIRE MCCASKILL, D-MO.

[*] STEPHANOPOULOS: Good morning and welcome to “This Week.”

The Palin phenomenon.

(BEGIN VIDEO CLIP)

UNKNOWN: They lashed out at Sarah Palin , dismissed her as good- looking.

(END VIDEO CLIP)

STEPHANOPOULOS: Amid charges of sexism and swift boat politics...

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA, D-ILL.: So spare me the phony outrage. Enough is enough!

(END VIDEO CLIP)

STEPHANOPOULOS: ... John McCain ’s running mate faces her first interview.

(BEGIN VIDEO CLIP)

CHARLES GIBSON, ABC NEWS: Do you agree with the Bush doctrine?

GOV. SARAH H. PALIN, R-ALASKA: In what respect, Charlie?

(END VIDEO CLIP)

STEPHANOPOULOS: This morning, debating the fallout, with Senator Claire McCaskill for Obama and Carly Fiorina for McCain.

Then...

(BEGIN VIDEO CLIP)

UNKNOWN: We have determined that it is necessary to take action.

(END VIDEO CLIP)

STEPHANOPOULOS: With the financial system reeling, we talk to America’s foremost expert -- longtime Federal Reserve chair Alan Greenspan.

George Will, Jay Carney, Claire Shipman and Paul Begala debate the week’s politics on our roundtable.

And as always, the Sunday Funnies.

(BEGIN VIDEO CLIP)

DAVID LETTERMAN, TALK SHOW HOST: New York City cab drivers, by the way, are offering their Barack Obama special. They’ll gladly accept change.

(END VIDEO CLIP)

STEPHANOPOULOS: Hello again. Sarah Palin seems to have given John McCain a booster shot with women voters, and she’s back on the trail after her first interview with Charlie Gibson. Here to debate how she did, what’s next, and the increasingly tough tone of the campaign are Senator Claire McCaskill for Barack Obama and Carly Fiorina, the former chair of Hewlett-Packard, now victory chair for John McCain . Welcome to you both.

FIORINA: Thank you.

MCCASKILL: Thank you.

STEPHANOPOULOS: And Senator McCaskill, let me begin with you. You had a very harsh reaction to the pick of Sarah Palin . You said you’re uncomfortable with anyone in line to be vice president to quote, “one of the oldest presidents we’ve ever hard, that has never met a world leader.” Did the interview change your mind?

MCCASKILL: No, the interview didn’t change my mind. I think what’s really important here is that we begin to have a real dose of the truth about the presidential candidate and the vice presidential candidate on the Republican side in terms of this image of reform.

Sarah Palin has taken more in federal earmarks per person than any governor in the history of the planet. She asked -- while John McCain was making fun of DNA earmarks for bears, she was asking for a DNA earmark for seals. Almost at the identical moment.

STEPHANOPOULOS: I want to get to those arguments, but first, is it really fair game to bring in Senator McCain’s age like that, saying that he would be one of the oldest presidents we’ve ever had?

MCCASKILL: Well, I think what we’re talking about is a reality. Other people talk about his melanoma. We’re talking about a reality here that we have to face. This is someone who’s going to be one heartbeat away from the presidency. All of us know it. I just think that it’s the facts, George, and that’s something that we need to start focusing on, are the facts, instead of distortions and lies.

STEPHANOPOULOS: Your response?

FIORINA: Well, I think you need look no further than the op-ed page of the New York Times today to realize that the Democratic Party is in full-throated panic over Sarah Palin . You have a column by Maureen Dowd that is mean-spirited in the extreme. You have a column by Frank Rich that is disrespectful to a presidential candidate who is vigorous, who is able to govern for eight years, and who will be, current trajectory, the president of the United States. And you have a column by Tom Friedman, whom I generally love, who is reverting back to the old argument the conservatives are stupid.

STEPHANOPOULOS: How about (inaudible)...

(CROSSTALK)

FIORINA: Sarah Palin has transformed this race. She has transformed this race by energizing the Republican Party. She has transformed this race by having a whole set of independent and yes, Democratic women, say it is the Republican Party who gets it, it is John McCain who gets it, not the Democratic Party who has taken their vote for granted.

STEPHANOPOULOS: (inaudible) that we have to face the facts about John McCain ’s age, and that Sarah Palin on the issue of earmarks is -- has not walked the walk?

FIORINA: OK, well, let’s start with John McCain ’s age. I frankly find this disrespectful in the extreme. This is ageism. All you need to do is look at the schedule that John McCain has kept for the last two years to realize that he is one of the most vigorous, most energetic campaigners, frankly, in my judgment, out there. So I think this continued resort to “he’s too old” is desperation, frankly, not to mention disrespectful to a very capable commander in chief.

In terms of earmarks, Claire McCaskill conveniently forgets the fact that Barack Obama has asked for almost $1 billion worth of earmarks in a very short tenure in the Senate. That’s about $1 million a day. She also conveniently ignores the fact that Sarah Palin as governor stood up and said, “I know earmarks are corrupting. We must ask for less of them...”

STEPHANOPOULOS: But she still...

(CROSSTALK)

FIORINA: ... and vetoed about -- as governor, she did not. As governor, she vetoed about half a billion dollars...

MCCASKILL: No, she did. She just requested...

FIORINA: As mayor...

MCCASKILL: She just requested this year, George. She requested hundreds of millions of dollars of earmarks for Alaska.

MCCASKILL: She took the money for the bridge to nowhere. She took -- she hired lobbyists to get earmarks.

This is a woman who has been lobbying for earmarks, has received earmarks. As a mayor, as a governor.

This is a good example of what I’m talking about. You know, honor is talked about a lot in this campaign. Honor comes with honesty. And you’ve got to be honest about the facts.

Sarah Palin has been an earmark queen in Alaska. That’s the facts.

STEPHANOPOULOS: Let Carly respond.

FIORINA: The facts are that Sarah Palin rejected the money for the bridge to nowhere. The facts are that Barack Obama has asked for more earmarks in his short tenure than Sarah Palin ever has. So if we want to have an argument about the facts of reform, let’s ask whether Barack Obama has ever stood up against his party, has ever took a tough position.

Sarah Palin without question stood up against the Republican Party, is a reforming governor. Barack Obama without question voted “present” over 100 times rather than take a tough position on a tough issue, and he has never stood up against his party.

So if we want to have an argument on the facts of reform, let’s have it. But let’s not dismiss...

STEPHANOPOULOS: I do want to get your response on Barack Obama , first...

FIORINA: Let’s not dismiss John McCain as the commander in chief, and I think the Democratic Party has done a -- made a huge mistake in...

STEPHANOPOULOS: Just to clarify...

FIORINA: ... focusing so much attention on Sarah Palin .

STEPHANOPOULOS: ... one point on the bridge to nowhere. It’s true that she stopped the bridge to nowhere project...

FIORINA: Yes, she did stop it.

STEPHANOPOULOS: ... but she did keep the money.

FIORINA: Sarah Palin has made significant reforms and significant progress in the amount of earmark money that Alaska takes. She stood up as governor and said, “we must reform this corrupting process.”

It is true that as mayor, she worked within the system that she was a part of, but it is also true that she stepped forward against her own party and said enough is enough.

STEPHANOPOULOS: Let me get to another point that is raised in this interview. Sarah Palin was asked by Charlie Gibson about Hillary Clinton. Here is what she had to say.

(BEGIN VIDEO CLIP)

PALIN: I think he’s regretting not picking her now. I do.

But what determination and grit and even grace through some tough shots that were fired her way. She handled those well.

(END VIDEO CLIP)

STEPHANOPOULOS: Even Senator Biden said this week that Hillary might have been a better pick. Did Senator Obama give the McCain campaign an opening by not picking Hillary Clinton?

MCCASKILL: Well, I think that Joe Biden is going to be a terrific vice president. Joe Biden is fully capable of stepping into the presidency at a moment’s notice.

I also think it’s important, George, once again, this issue is about being honest and forthcoming with the American people. John McCain has not told the truth about Sarah Palin . He has run an ad that is terribly distorted and full of lies about -- you’re talking about making women mad. When women figure out that John McCain has run an ad saying that when Barack Obama wanted to give education to kindergarteners about how to avoid sexual predators, that in fact, they ran an ad that said that he wanted to give them sex education? I mean, this is the kind of game that’s being played on those...

STEPHANOPOULOS: So no regrets about Hillary Clinton.

MCCASKILL: And by the way, speaking about honest, Sarah Palin this summer called Hillary Clinton a whiner. And now it’s oh, you know, they are being disrespectful to Hillary. I didn’t hear her say that when she was asked that before she was the vice presidential pick. And when John McCain was asked a question at a forum -- you remember this -- someone said, “how do we stop the b,” referring to Hillary Clinton, and John McCain laughed. So all -- and they had buttons at their convention (inaudible)...

(CROSSTALK)

STEPHANOPOULOS: What’s your response, Carly Fiorina? FIORINA: Well, first, let’s just remember for the record -- it was the Barack Obama campaign that launched the first negative ad. Let’s just recall, if we want to talk about honesty, let’s recall the spate of ads that said that John McCain was in favor of a 100-year war in Iraq. Please, I mean, this high and mighty attitude that somehow John McCain has stopped to a new level in politics is A, untrue, and B, as I recall, Barack Obama promised a campaign of hope and politics of promise, et cetera, et cetera.

But having said that, my personal opinion -- Barack Obama made a critical strategic error by not choosing Hillary Clinton. There are a whole host of women in the Democratic Party who believe the Democratic Party does not understand what sexism is, routinely underestimates the impact of women, and they are coming in droves to the Republican Party because they think the party and John McCain get it. That’s a fact.

STEPHANOPOULOS: It is true that this week, we saw a 20-point swing among white women in our ABC News poll.

MCCASKILL: Let me say, I think Sarah Palin has an incredibly winning personality. She’s a very skilled politician. And I understand a post-convention bump. And she’s a great role model for working women. I mean, I’m talking as a woman who took my breast pump to work for all three of my children. So that’s terrific.

MCCASKILL: But women of America are going to kick the tires the next 55 days, George, and they’re going to going to find out that this is a ticket that wants to put women in prison for having an abortion after they have been raped.

This is a ticket that has -- is opposed to equal pay for equal work. This is a ticket that does not embrace early childhood education. This is a ticket...

STEPHANOPOULOS: Let me stop you with those three...

MCCASKILL: ... that is not good.

STEPHANOPOULOS: ... because Carly Fiorina is shaking her head there.

FIORINA: Those are ridiculous charges, point one. But I think the important point here is that this is what the Democratic Party has done for years. It has tried to hold women hostage by frightening them on issues such as reproductive rights, Rove v. Wade.

American women in this country will not be held hostage by the politics of fear on Roe v. Wade anymore. I know more many, many pro- choice women who are pro-McCain. And if we want to talk about equal pay for equal work, I think this once again is an example of John McCain walks the walk and Barack Obama talks the talk.

And all you have to do is look inside their two Senate offices and assess how are women paid relative to men. In John McCain ’s office, women are paid more. In Barack Obama ’s office, women are paid less. That’s a fact.

MCCASKILL: This is a great example. John McCain proudly states he wants to overturn Roe v. Wade. That’s a fact, George. Carly can’t get around that fact. And by the way, equal pay for equal work, John McCain is opposed to that legislation. He said so. He didn’t show up to vote on it. But he said, if I would’ve been there...

STEPHANOPOULOS: This is the Lilly Ledbetter legislation.

MCCASKILL: This is just a few months ago. He said, I’m opposed to it. And by the way, women have been voting on our side of the ticket because they pay attention to the policies that matter, on education, on health care, on how they take care of their children and their mothers. This is what they care about. And they’re going to pay attention this election. And I’ll make a prediction that the women of America will vote for Barack Obama by a health majority.

STEPHANOPOULOS: How about the equal pay legislation?

FIORINA: Well, you know, here is one thing that -- this always happens. Claire and I battle it out, but we find something to agree on. I absolutely agree with Senator McCaskill, women care about health care, education, national security, the economy, whether we’re going to create jobs here in America or overseas.

And that is why they’ll vote for John McCain , not all of them, but enough of them that he’s going to win. Because just wherever they come out on Roe v. Wade, most women are not single-issue voters, they are like men, caring about all of the issues that matter to this country.

MCCASKILL: I agree.

FIORINA: So we’re going to win, we’re going to win on the substance of the issues, as I’ve said all along.

STEPHANOPOULOS: We’re going to end on that point of agreement. Thank you both. I’ll have you back, it was a spirited debate.

And now we are going to turn to the economy and what some are calling a death spiral in our financial markets. All weekend long, Wall Street’s top executives have been holding emergency meetings with government officials at New York’s Federal Reserve, trying to come up with a plan to save yet another battered investment bank.

Lehman Brothers has not found a white knight yet. And despite earlier government action to salvage Bear Stearns and takeover mortgage giants Fannie Mae and Freddie Mac, Treasury Secretary Hank Paulson is signaling that the government is reluctant to step in again.

And so for more on this, we are now joined by the man who knows more about these problems than just about anyone in the country, the former chairman of the Federal Reserve, Alan Greenspan.

Welcome back.

GREENSPAN: Thank you very much, good morning.

STEPHANOPOULOS: Should the government step in and help Lehman Brothers the way they helped Bear Stearns?

GREENSPAN: They’re trying to do it in a different manner. And the reason is obvious from seeing the effect of the bailout of Bear Stearns. When Bear Stearns was bailed out, it drew a line under that level of firm, implying that anything that was larger than that firm was capable of getting federal assistance.

Now if you generalize that, it is very clear that that is an unsustainable situation in the financial markets and in the markets for saving the...

(CROSSTALK)

STEPHANOPOULOS: The government can’t put a floor underneath these firms.

GREENSPAN: They cannot do that. And so what they are trying to do now with respect to Lehman is to find a way in which there is no government money involved in this particular set of negotiations.

STEPHANOPOULOS: And what if they can’t?

GREENSPAN: Well, if they can’t, they have to make a very decision as to whether or not they allow it to liquidate or they support it. And those are very difficult decisions.

STEPHANOPOULOS: What would you recommend?

GREENSPAN: I don’t know enough of what is going on. I would have to have very detailed information of what’s on the Lehman Brothers balance sheet, whom they are counterparties to, and what the repercussions would be with any particular solution.

STEPHANOPOULOS: But I guess the question is, where do you draw the line? You, over the course of your career, have been an advocate of free markets. But in the last year we’ve seen the government step in to help Bear Stearns, the government take over Fannie Mae and Freddie Mac.

STEPHANOPOULOS: And I guess I have two questions. One, where do you draw the line in government intervention? And two, and perhaps more important, how much worse is this going to get?

GREENSPAN: First of all, let’s recognize that this is a once-in- a-half-century, probably once-in-a-century type of event.

STEPHANOPOULOS: Is it the worst you’ve ever seen in your career?

GREENSPAN: Oh, by far. There’s no question that this is in the process of outstripping anything I’ve seen, and it still is not resolved and it still has a way to go. And indeed, it will continue to be a corrosive force until the price of homes in the United States stabilizes.

That will induce a series of events around the globe which will stabilize the system.

STEPHANOPOULOS: And you think that will happen early next year?

GREENSPAN: That’s my best guess. In a sense that I’ve always argued that with this excess level of single-family vacant homes for sale, that excess does not have to be completely removed to get prices to stabilize. But you have to get the rate of liquidation of those inventories at a pace which causes the market structure to stabilize.

And once that happens, then the equity in homes in the United States becomes clear, which of course is the ultimate collateral for the mortgage-backed securities issued from the United States that have spread around the world.

STEPHANOPOULOS: In the meantime, though, we see this trouble with Lehman Brothers right now. Washington Mutual, the country’s largest savings and loan, seems to be on the ropes as well. American International Group faced tremendous trouble this week. Even Merrill Lynch facing trouble.

Are we going to see more of these major financial institutions fail?

GREENSPAN: I suspect we will. But in and of itself that does not need to be a problem. It depends on how it is handled and how the liquidations take place. And indeed we shouldn’t try to protect every single institution. The ordinary course of financial change has winners and losers. And the... STEPHANOPOULOS: But it seems like everyone that has come along, at least recently, the government has said, we have to come in and save it.

GREENSPAN: That is basically because we have never seen the degree of interconnectedness on a global scale that has occurred in the last decade. And so that these are different from what we experienced in earlier years when they were largely localized.

I mean, for example, you did get some contagion, for example, from the Russia default or from the Long-Term Capital Management default, but they weren’t of the global scope that currently exists largely because the very factors of globalization, which have been so extraordinarily beneficial to the world at large, and have taken hundreds of millions of people out of poverty, has eventually a correction that it must go through.

And this is what we are experiencing.

STEPHANOPOULOS: I know there are a number of you on Wall Street who are concerned that you could see a meltdown -- further meltdown even this week. And one suggestion that has been made is that, you know, the power of short-sellers here is really quite pernicious. And some have said that perhaps the government should step in and suspend the short-selling in these financial institutions until the market can stabilize.

Is that a good idea?

GREENSPAN: Very bad idea, because what the short sellers add to the system is a more realistic view of pricing. Because, remember, short-sellers, by their nature, are not those with investments in a particular company.

And if you only have those with investments in a particular company, and those who are sympathetic to it in the market, you will get distortions which will ultimately create far more problems than allowing short-sellers in which improves the liquidity of a system, enables the adjustments to take place, enables prices to be finely (ph) determined.

Because it’s only when you get clarity in price that markets stabilize.

STEPHANOPOULOS: So at this point, that was clearly a bad idea, you say, stepping in to help Lehman Brothers may be necessary, you don’t know enough right now.

How about at the same time we’re seeing the auto industry saying they need $25 billion in loans in Washington in order to meet the mandates that Washington has set, is that a good idea?

GREENSPAN: I cannot think of a list which is longer than those who would have similar such desires and justifications for government help. To the extent that you do that, to the extent that bailouts, which are the use, basically, of federal funds, are draws on our scarce savings supply.

You undermine the growth of the economy, and ultimately if it’s on a wide scale basis, you get stagnation. And economic stagnation is a very dangerous thing for a democratic society.

STEPHANOPOULOS: To try to make this simple for a lot of viewers at home, I can imagine an auto worker in Michigan, or an auto executive in Detroit, saying, well, wait a second. You think it’s OK to come in and help Bear Stearns -- these financial markets always get the help they need when they are in trouble. But we get nothing.

GREENSPAN: I think the argument has got to be that there are certain types of institutions which are so fundamental to the functioning of the movement of savings into real investment in an economy that on very rare occasions -- and this is one of them -- it’s desirable to prevent them from liquidating in a sharply disruptive manner, because that’s an assistance to the economy as a whole, and those auto workers have got just as much -- they are just as much involved in how the economy as a whole runs as everybody else.

It’s a different type of bailout. It’s not assistance; it’s stabilization.

STEPHANOPOULOS: When you were on the program last December, you said the chances of a recession were about 50 percent. So far, that has not occurred. We have not seen recession this year. I know you think the housing market will start to turn around early next year. What are the chances that the U.S. will escape a recession over the next year?

GREENSPAN: Well, if you had pressed me the last time I was here, I would say very unlikely. The remarkable thing is now well the non- financial part of the economy is done. They -- and the reason, as I said on many occasions, is that we’ve gone through a period of long- term interest rates being very low, and that enabled corporate sector and business generally to take its short-term liabilities and fund them into longer-term liabilities at low interest rates, which meant they did not need to go into the market for money all of the time.

And the result has been that even though there’s been a severe credit crisis, it’s not really impacted the borrowing needs of the non-financial sector, because they don’t need very much to borrow.

What has essentially happened here is a situation where the credit squeeze is beginning to affect the revenues of these companies, and we’re beginning to see the American economy sag along with the rest of the world. And actually, the United States is doing somewhat better than the rest of the world.

(CROSSTALK)

STEPHANOPOULOS: So the chances of escaping a recession now greater than 50 percent?

GREENSPAN: No, I think it’s less than 50 percent. I can’t believe we could have a once-in-a-century type of financial crisis without a significant impact on the real economy globally, and I think that indeed is what is in the process of occurring.

There are positives. The decline in the price of oil, the decline in the price of food. Inflation coming down, at least in the short run. May be enough to stabilize this. I’d be delighted if it were to happen. I wouldn’t put my money on it.

STEPHANOPOULOS: So the message today, the bad news is not over? A sobering message, but thank you for your honest views, Mr. Greenspan. Hope to see you again soon.

GREENSPAN: Thank you very much. It’s a pleasure being with you.

END

.ETX

Sep 14, 2008 10:19 ET .EOF

Source: CQ Transcriptions

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