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"THE MCLAUGHLIN GROUP" HOST: JOHN MCLAUGHLIN PANEL: MORT ZUCKERMAN, U.S. NEWS & WORLD REPORT; ELEANOR CLIFT, NEWSWEEK; MONICA CROWLEY, SYNDICATED RADIO COMMENTATOR; CHRYSTIA FREELAND, FINANCIAL TIMES TAPED: FRIDAY, APRIL 4, 2008 BROADCAST: WEEKEND OF APRIL 5-6, 2008

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MR. MCLAUGHLIN: Issue One -- The "R" Stigma.

(Begin videotaped segment.)

SEN. CHARLES SCHUMER (D-NY): Am I correct in understanding that you now believe a recession is possible, certainly more likely than it was a few months ago?

BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE BOARD: A recession is possible.

(End videotaped segment.)

MR. MCLAUGHLIN: So the dreaded "R" stigma has finally and officially reared its head. In testimony before Congress, Federal Reserve Chairman Ben Bernanke now acknowledges that recession is a possibility, but quickly adds a "but."

MR. BERNANKE: (From videotape.) But a recession is a technical term.

MR. MCLAUGHLIN: Then, just as fast, like the boardwalk game of "Whack-a-Mole" -- now you see the mole, now you don't -- Bernanke pounded the "R" word back into its hole, opting instead for an existing, quote-unquote, "contraction."

MR. BERNANKE: (From videotape.) On the whole, there might be a slight contraction.

MR. MCLAUGHLIN: Question -- Why are officials so unwilling to use the "R" word? Mort.

MR. ZUCKERMAN: Well, in part because they think if they use the word, it'll actually produce a further erosion in confidence; and where the financial markets are literally falling apart because of a lack of confidence, they don't want to contribute to that. So it makes perfect sense that they do that. And --

MR. MCLAUGHLIN: Eleanor -- go ahead.

MR. ZUCKERMAN: -- I might say one other thing. Technically he's right. It's not a recession. Two contractual quarters in a row is the technical definition of a recession. But the most important thing is to address the issue of confidence, which is the one thing they don't want to play with.

MR. MCLAUGHLIN: Well, it sounds like the emperor's clothes. You know, the emperor is marching down the street and nobody says anything about it, the fact that he's naked.

MR. ZUCKERMAN: The emperor --

MR. MCLAUGHLIN: So, therefore, no one knows he's naked.

MR. ZUCKERMAN: The emperor did not have to deal with financial markets. If he did --

MS. FREELAND: Not just financial markets, but also consumer confidence.

MR. ZUCKERMAN: Right, consumer confidence.

MR. MCLAUGHLIN: Eleanor.

MS. CLIFT: Well, the problem is the refusal to use the word "recession" when everybody feels like they're in a recession in the country, and the word is repeated on shows like this all the time, the administration looks like they're out of touch. And when you have a New York Times poll that has 81 percent of the country thinking we're on the wrong track, those are dramatic numbers.

And so this administration, this president, can now add mismanagement of the economy to the mismanagement of the war. I don't think they took polls back when Hoover was in the White House, but these numbers are approaching the anxiety of the Depression.

MR. MCLAUGHLIN: Okay, so the situation is bad, and Congress has a $15 billion relief plan.

In 2006 and 2007, over those 24 months, more than 2 million houses were foreclosed in the U.S., and the number is growing. To help prevent future foreclosures, the U.S. Senate this week announced a $15 billion relief plan. It includes tax credits for consumers, $7,000 for those who buy an already foreclosed home; credit counseling for consumers, $100 million to prevent imprudent borrowing; tax-exempt bonds for states to issue to refinance subprime mortgages; funding for local governments, $4 billion to buy and then fix up and then sell foreclosed homes; tax breaks for businesses, $6 billion for companies like home builders that are now incurring losses.

They'll get a tax break if they paid big tax bills when times were better -- get this -- during the four years prior to 2008. It's called a tax-loss carry-back, and it's only the second time in recent history the government is using this tool to stimulate the economy. This is, first and foremost, helping the villains in the story, says Dean Baker, co-director of the Center for Economic and Policy Research.

Do you want to pick that apart, please, Monica?

MS. CROWLEY: (Laughs.) That whole piece -- this goes under the category of "Congress, please." Politicians always love to look like they're doing something, especially when there's an economic slowdown, whether we use the word recession or not. Politicians like to try to intervene, but most of the time government intervention creates more of a problem or more of a series of problems.

You talked about tax breaks and tax incentives. Those are always a good idea. But when you compound it with all the other things that the Congress has added on to this, the stimulus looks less like a stimulus and more like politicians covering their behinds.

MR. MCLAUGHLIN: What do you think of this plan?

MS. FREELAND: I think that -- well, I'd like to respond to Monica, actually, and I think she's absolutely wrong. I think that a real problem that we have with the current administration is something that some people are calling market fundamentalism.

Whatever your politics are, even if you're a person who generally believes in free markets and in a low-tax economy, this is a really serious financial crisis. It's a crisis which is involving structured financial products whose impact we don't understand in a global economy whose scope we don't fully comprehend. And to think that the government should just stand aside, that regulators and government and lawmakers shouldn't be trying to limit the impact --

MS. CROWLEY: No, but I'm not saying -- (inaudible) --

MS. FREELAND: No, no, but you said that the impact --

MS. CROWLEY: -- but I'm saying this kind of massive intervention also has a counterproductive impact.

MS. FREELAND: No, Monica, these specific measures were not very good. And in particular, the break for home builders was crazy.

MR. MCLAUGHLIN: What does that mean?

MS. FREELAND: Why should the house builders, who are not particularly crucial to the potential economic recovery, get a tax break? What is really missing is a sophisticated effort to help people stay in their homes and to help put together this broken-down --

MS. CLIFT: I'll tell you why the home builders got --

MS. FREELAND: -- (puzzle ?) of mortgages --

MS. CLIFT: I'll tell you why the home builders got a break, because if they are allowed to further collapse, they will further deflate the housing market, and the rest of us will get hurt. And I think the members of Congress went home on spring break and they got an earful. "You bail out Bear Stearns and you leave all the homeowners alone?" They had to act and they --

MR. MCLAUGHLIN: Okay --

MS. FREELAND: You could focus the money in different places --

MR. ZUCKERMAN: That's not the homeowners. MS. FREELAND: -- if you were more sophisticated in figuring out how to put together the people who are in the homes who want to keep them --

MR. MCLAUGHLIN: Okay, hold on, ladies. Hold on, ladies.

MS. CLIFT: (Inaudible.)

MR. MCLAUGHLIN: Another lifeboat flare -- Morgan buys Bear Stearns, $29 billion fed dollars.

The federal government facilitated the sale of the investment bank Bear Stearns to J.P. Morgan; $29 billion was provided by the feds in taxpayer dollars. This was seen by many as a big business Wall Street bailout. The negative sting has hit Congress.

Question: What's the problem for Congress, Mort?

MR. ZUCKERMAN: Look, this is a very serious issue with Bear Stearns. If Bear Stearns did not get bailed out -- that company was worth $20 billion about less than a year ago, and it was now sold for really a billion dollars, so this is not a bailout of Bear Stearns.

What it is is a protection of the financial system. Bear Stearns had two and a half trillion dollars in what are called credit default swaps which, if they had collapsed, would have had enormous repercussions, in addition to which they had $49 billion in mortgage- backed securities, which would have had to be dumped on the market, which would have broken the market, which have had a major risk of a system-wide collapse in the financial system. That's why they did it.

MR. MCLAUGHLIN: You mean it could be a catalyst --

MR. ZUCKERMAN: Absolutely.

MR. MCLAUGHLIN: -- for system-wide. How does that follow? How do you get from A to Z on that?

MR. ZUCKERMAN: Because when you break the prices of these securities, okay, or you break the insurance for these securities, both of which are in the same category, all the financial institutions that own these securities have to mark down their securities. This reduces their capital, makes it impossible for them to lend. It's already difficult for them to lend. You would have a freeze-up of the financial system and a breakdown of confidence.

MR. MCLAUGHLIN: So you totally approve of the Fed, quote- unquote, "bailout."

MR. ZUCKERMAN: Absolutely. This would have been a catastrophe otherwise, and for everybody, for you and for me as well.

MS. CLIFT: I'd like to speak to that. MR. MCLAUGHLIN: Okay, go ahead.

MS. CLIFT: And I'll agree, because they did the right thing. Otherwise they would have had a collapse of -- it would have been a margin call to the world.

MR. ZUCKERMAN: Right.

MS. CLIFT: But, look, what the administration has done here, they have opened the Federal Reserve discount window, which is a huge policy change. It's the financial equivalent of Bush declaring he's going to pull out of Iraq. I mean, they're basically saying that they will lend money to these investment firms the way they do to traditional regulated banks in exchange for these investment houses to open themselves up to government regulation. And so this is a huge policy change.

MR. ZUCKERMAN: No, excuse me. It's not in exchange for whatever they're going to open themselves up to eventually. It's to save the financial system, which is the absolute requirement of the Federal Reserve, amongst others. You know, there's an old cliche. When the tide goes out, you find out who's wearing a bathing suit. Nobody was wearing a bathing suit in the financial community. Everybody's exposed. They must not allow this to happen, because if you do that, you'll destroy the economy.

MS. CLIFT: I'm agreeing. But all the claptrap about "Oh, we don't interfere with the economy; let the markets" --

MR. ZUCKERMAN: Oh, well, that's a whole other issue. I agree with you.

MS. CLIFT: -- that's just totally out the window.

MR. MCLAUGHLIN: Okay, hold on, ladies.

MS. FREELAND: (Inaudible) -- the window, Eleanor, right?

MR. MCLAUGHLIN: Do you want to get in on this?

MS. CROWLEY: Well, look, the government facilitated J.P. Morgan Chase buying out Bear Stearns. But the problem was that they then went on to offer credit to all of these other brokerage firms, which then raises the question, why didn't the government just go and then directly help Bear Stearns?

MR. MCLAUGHLIN: You mean, open the window wider?

MS. CROWLEY: Exactly. I mean, raising --

MR. MCLAUGHLIN: He's saying there was a compelling national interest in the government bailout of Bear Stearns. MS. CROWLEY: But here's a bigger question. If you're going to intervene with a brokerage house, and it may be the fifth-largest brokerage house -- and Mort's argument is perfectly legitimate -- but doesn't it also open a window, then, for every brokerage firm or company --

MS. FREELAND: But Monica, that's the whole point.

MS. CROWLEY: -- that's (making the case ?) for government intervention?

MS. FREELAND: That's exactly the point.

MS. CROWLEY: That's when -- (inaudible) -- the marketplace values kick in and the marketplace forces kick in.

MS. FREELAND: No, no --

MS. CROWLEY: -- and allow some of this to wash out for their failures and irresponsible actions.

MS. FREELAND: The whole point of the Bear Stearns rescue was to put a backstop behind all of the financial institutions.

MR. ZUCKERMAN: That's right.

MS. FREELAND: And that was actually really important, because had you not done that, had you not said that effectively everybody is guaranteed beyond a certain point --

MR. ZUCKERMAN: Look, John, you had a run on the bank.

MS. FREELAND: -- then the crisis that we're talking about would have happened.

MR. ZUCKERMAN: Bear Stearns' cash went from $12 billion to $2 billion in one day. They had one more day to save that institution, which is what they did. But it wouldn't have stopped there. It would have gone with other of the major investment banking firms or some of the commercial banks. You would have had literally a systemic risk of collapse.

MR. MCLAUGHLIN: Well, we are saying that all of the banks are having trouble --

MR. ZUCKERMAN: Absolutely. MR. MCLAUGHLIN: -- extending loans to each other. Therefore, we have a credit crunch. It's hard to get credit. Does this do anything to stanch the flow of the blood from that global situation?

MR. ZUCKERMAN: Yes. It's not good. Believe me, even after this, it's not good. It could have been catastrophically worse. That's exactly what they have to prevent. That was the key issue here.

MR. MCLAUGHLIN: Okay, the problem does not stop here. Here is Paulson, the secretary of Treasury.

HENRY PAULSON, TREASURY SECRETARY: (From videotape.) Our current regulatory structure was not built to address the modern financial system with its diversity of market participants, innovation, complexity of financial instruments, conversion of financial intermediaries and trading platforms, global integration and interconnectedness among financial institutions, investors and markets.

MR. MCLAUGHLIN: The modern financial system, according to the secretary of the Treasury. It includes, one, diversity of market participants; two, innovation; three, complexity of financial instruments; four, conversion of financial intermediaries and trading platforms; five, global integration; six, interconnectedness among financial institutions, investors and markets.

Clearly this is a massive overhaul of the lacking regulatory system. It is said that Paulson is proposing an overconcentration of power at the Fed level and it should be a more distributed power. He should leave well enough alone and build on those areas that really need further refinement, precision and force. What about that?

MR. ZUCKERMAN: That's nonsense.

MR. MCLAUGHLIN: Nonsense what?

MR. ZUCKERMAN: It's nonsense to say leave the system alone and build a little bit here or there.

MR. MCLAUGHLIN: Do you want to do --

MR. ZUCKERMAN: Let me just explain a little bit, okay? Today, 70 percent of the lending takes place outside the commercial banking system. The whole system is now reliant not on the commercial banking system, what it was in the 1930s. It is now relying much more on the investment banks, on the hedge funds, et cetera, et cetera.

They have to be brought under some degree of control, including, I might add, having enough equity so that they don't go under when they get overextended, and also making sure they don't get overextended. Otherwise we face a repetition of what we just had. MS. CLIFT: Yeah. But having said all that, this is a lame-duck administration. What he is proposing will take months, if not years, when you have the SEC and the FDIC and the ICC and those alphabet-soup agencies fighting among themselves. I wouldn't worry about this being put in place, or maybe --

MR. ZUCKERMAN: They have a responsibility to start the national dialogue on this.

MS. CLIFT: He's beginning the conversation. He's beginning the conversation.

MR. ZUCKERMAN: Right.

MS. CLIFT: He deserves credit for that.

MR. ZUCKERMAN: Right.

MS. CLIFT: But it's not going to be concluded under this administration.

MS. FREELAND: But it's good to be opening up, and it's actually good that it's not going to be concluded under this administration --

MS. CROWLEY: And actually --

MS. FREELAND: -- because we don't want hasty recreation of the financial architecture.

MS. CLIFT: Don't worry about that.

MR. MCLAUGHLIN: I've got a question for you.

MS. CROWLEY: What you just talked about, Paulson has had on the drawing board for about a year. And it's only because of these crises that it actually forced the administration's hand to go out with its modernization of legal apparatus that we're talking about from the 1930s.

MR. MCLAUGHLIN: What's the impact of all of this vital but totally boring algebra on Joe Six-Pack? What is the impact? What's the impact? Are we heading towards a depression? A depression.

MR. ZUCKERMAN: No.

MS. CROWLEY: I know there was a British newspaper that had that headline today. But, no, I don't think it's quite that serious.

MR. ZUCKERMAN: No.

MS. CROWLEY: There are serious problems that are --

MR. MCLAUGHLIN: Is all of this going to do any good? Is the congressional plan going to do any good, the $15 billion? MS. CROWLEY: Look, what the federal government is doing tinkers at the margins. But what we're talking about, what we're all talking about here, are structural issues and problems that are much deeper. And it's going to be a longer time --

MR. MCLAUGHLIN: They're talking about a spreading credit crisis.

MS. CROWLEY: -- than the band-aid that the Congress is putting on it.

MR. MCLAUGHLIN: They're talking about the spreading credit crisis.

MS. CLIFT: This is a presidential --

MR. ZUCKERMAN: We will be able to save the credit system if the government acts adequately. In the 1930s, the role of the federal government in the economy was 3 percent. It's now 20 percent. We have a lot of countercyclical programs that will, in effect, be seven times as effective as they were in the 1930s.

Secondly, the Federal Reserve system back then had to diminish the money supply because people were withdrawing gold from the system and the Federal Reserve had to make it up. We're beyond that point. So the Federal Reserve is adding money to the system in order to keep liquidity, to the extent that they can. So it's very different from the 1930s. This is not to say we won't have a major recession. As you know, I said it on this program. It's going to go on for a longer period of time. It's going to be two years.

MR. MCLAUGHLIN: Do you think the Fed is going to run out of the kind of money that can save us from a recession or a depression?

MR. ZUCKERMAN: Certainly they'll save us from a depression. These people know -- Bernanke, after all, specializes --

MR. MCLAUGHLIN: That's the precise point of the exit question. The exit question is, has the spreading credit crisis been contained by Bernanke and Paulson, or is it still out of control?

MR. ZUCKERMAN: No, we're still in trouble. But they have managed to contain some of it. It has not collapsed.

MR. MCLAUGHLIN: Is it a temporary fix? Is it like a fire in a forest? You put out a fire in one place; it starts in another.

MR. ZUCKERMAN: Right. And we're going to have to do a lot more than we've done to date, and it's going to continue to snowball. MR. MCLAUGHLIN: Eleanor.

MS. CLIFT: It's finger in the dike, and the country is really losing any confidence in the government in its regulatory power. Look, the FAA has now been ignoring planes that can't fly safely. And when you have 81 percent of the country saying we're on the wrong track, there's a lot that's going wrong. And the breakdown of regulatory oversight by this administration will go down as one of the significant failures.

MS. CROWLEY: Yeah, and the truth is that the government is running out of tools. I saw a headline the other day that said, "Fed runs out of ammo; throws guns." (Laughter.)

MS. FREELAND: Actually, I think this is a very interesting moment, because I think, in the wake of the Bear Stearns bailout, what we are seeing is a real calming of the credit markets. And to your specific question of whether the credit crisis has been resolved, it's, for the first time, I think, possible to think that maybe the Wall Street crisis is beginning to be contained.

The big question right now is what's happening on Main Street and what the American consumer is going to be doing. And so Eleanor's point about the right track/wrong track survey is essential.

MR. MCLAUGHLIN: What are you saying --

MS. FREELAND: If we then --

MR. MCLAUGHLIN: What are you saying in your editorials in the Financial Times about all this and the action taken -- what you've given me now?

MS. FREELAND: What I just said, what I just said.

MR. MCLAUGHLIN: All of this Pollyannish stuff?

MS. FREELAND: No, it's not Pollyanna, because what I'm saying is it's important to be very specific about where you're looking. And if you're looking for the next problem, John, don't look to Wall Street right now; look to Main Street.

MR. MCLAUGHLIN: I agree with Eleanor. I think it's a finger in the dike.

Issue Two -- Democratic Convention, 1924.

Madison Square Garden, New York City, 84 years ago. The Democratic Party assembles at its 1924 convention, and the scene is history-making mayhem -- back-room deals, clench-fisted party bosses, smoke-filled rooms, and deadlocked votes -- a brokered convention. Believe it or not, it extended over 16 calendar days with nine long convention days and -- get this -- 103 ballots before the nominee was finally chosen, John W. Davis. In the general election, Davis lost, 54 percent to 28 percent, to Republican Calvin Coolidge.

1924 is a forecast of what may be in store for the Democrats in five short months at their August convention this year, starting August 25 in Denver, Colorado. Will that problem go away because Hillary will quit? Forget about it.

If Hillary wins the Pennsylvania primary two weeks from next Tuesday, as she well could, then goes on two weeks after that and wins both North Carolina and Indiana primaries, as she could, then Hillary will have the big "mo." And, like a legion of avenging angels, that big "mo" will alight from Barack to Hillary, and Barack won't quit. So it will then have to be settled on the convention floor, 1924 redivivus.

Question: What's wrong with a brokered convention? Eleanor.

MS. CLIFT: It generally leads to the loss of the nominee. (Laughs.)

MR. MCLAUGHLIN: You mean, Coolidge?

MS. CLIFT: Well, I mean Jimmy Carter in 1980. I mean Gerald Ford in 1976. And if a party is seen as divided, it generally erodes support in November.

MR. MCLAUGHLIN: Isn't there an offset?

MS. CLIFT: Yeah, there is.

MR. ZUCKERMAN: There is.

MS. CLIFT: And there are a lot of people getting excited. And it's wonderful if you live in Indiana or North Carolina.

MR. MCLAUGHLIN: Great TV. Great TV.

MS. CLIFT: You actually -- your vote matters this time. And if she does win those primaries you just outlined, and if she does surpass Obama in the popular vote, that is the threshold that the super-delegates are beginning to talk about.

I think the super-delegates will speak individually. In fact, they've begun speaking. Almost every day a super-delegate comes out for Barack Obama, and some of them are pretty major figures -- Lee Hamilton, co-chair of the 9/11 commission; Bob Casey, senator, Pennsylvania, pro-gun, pro-life, helps navigate the politics in that state.

MR. MCLAUGHLIN: But nothing can save her?

MS. CLIFT: No, what can save her is winning primaries, and winning big, and then she has a case to make.

MR. MCLAUGHLIN: Mort, what do you think?

MS. CLIFT: It's a long shot.

MR. ZUCKERMAN: Well, I have to say, I think that --

MR. MCLAUGHLIN: Do you think we're headed to the 1924 deal?

MR. ZUCKERMAN: No. I mean, I appreciate your home videos that you've put on the program, John.

MR. MCLAUGHLIN: National Archives.

MR. ZUCKERMAN: I will say that we are going to have that kind of convention. It is not the worst thing in the world. The whole purpose of, it seems to me, the super-delegates is that they will have a greater degree of personal knowledge of the candidates. That kind of peer-group assessment, in my judgment, has been lacking from our system. It is true of the British system and it works pretty well there. They will make their own independent judgments, I hope.

MS. FREELAND: I think the big difference between the British system or the Canadian system or any other system where you have actual delegates, mostly elected politicians, choosing the leader is in America you have primaries and you have opportunity for party members to vote. And that's what I think is the real difficulty of the brokered convention. If there is a perception that the elite, the establishment of the Democratic Party, goes against the will of the ordinary people, that will be a problem for the Democrats, particularly this year, when you've seen so much energy.

MS. CLIFT: If there is a deadlock, Al Gore is the default candidate, not Hillary Clinton.

MR. MCLAUGHLIN: Don't you think that -- MS. CROWLEY: Well, there's news.

MR. MCLAUGHLIN: Don't you think that there is a substantial offset to a brokered convention and whatever disunity it may cause, and that is the economy, and the economy is going to kill McCain, is it not?

MS. CROWLEY: Well, we just did the whole opening segment on this show about the drag that the economy is on the sitting president and on the Republican nominee.

MR. MCLAUGHLIN: So there's nothing, really, that the Democrats can do to impair their chances of taking over the White House.

MS. CROWLEY: Wait a minute. Wait a minute. I mean, given the situation, economically, the war in Iraq and so on, this should be -- whatever Democrat nominee should be running 10 points ahead of John McCain, and they're not. It's dead even. In some polls, even McCain is ahead.

MR. MCLAUGHLIN: Okay, how they fit now. Two months ago, there were three candidates in the Democratic race -- On the political left, John Edwards; in the political center, Barack Obama, as he seemed then; on the political right, Hillary Clinton.

In January, Edwards withdrew. Hillary stayed on the right. And the liberal wing of the Democratic Party usurped control and anointed Obama, with his 95.5 liberal rating, making him the most liberal of the 100 U.S. senators in 2007, as ranked by the National Journal.

With only two candidates now in the nomination race, Democratic liberals sprang into action, calling for Hillary to quit. They don't want 1924 all over again with the 2008 presidential election lost to the Republicans. Hillary dies for the party.

SEN. PATRICK LEAHY (D-VT): (From videotape.) There is no way that Senator Clinton is going to win enough delegates to get the nomination. She ought to withdraw and she ought to be backing Senator Obama.

SEN. JOHN KERRY (D-MA): (From videotape.) The important thing is to be fighting against John McCain and not to be destructive in this campaign, either campaign.

MR. MCLAUGHLIN: President Clinton repudiates these Hillary assassins.

FORMER PRESIDENT BILL CLINTON: (From videotape.) And all these people who tell you, "Oh, we need to shut this thing down now; the Democrats are so divided" -- that's a bunch of bull. We are strengthening the Democratic Party. Chill out. We're going to win this election if we just chill out and let everybody have their say. MR. MCLAUGHLIN: Question -- Is Bill right? And why are the party bosses trying to bully Hillary out of the race? I ask you, Chrystia.

MS. FREELAND: Well, I think it's pretty clear that the safe course for the Democratic Party right now would be if everyone could come together, if Hillary Clinton could very graciously and happily say --

MR. MCLAUGHLIN: This is not a static situation. We don't know what's going to happen over the next three months to Obama or Hillary.

MR. ZUCKERMAN: Absolutely.

MR. MCLAUGHLIN: We don't know what's going to be revealed.

MS. FREELAND: John, if you want to know why someone like Bob Casey, why someone like John Kerry, is saying this, this is why. It's an anxious moment for them. And if the Democrats were to lose --

MR. MCLAUGHLIN: We've got 10 seconds left -- 10 seconds. I want to start with you -- 10 seconds. What do you want to say?

MR. ZUCKERMAN: I absolutely do not think Hillary should withdraw.

MS. CLIFT: No. Right.

MR. ZUCKERMAN: They ignore the first --

MR. MCLAUGHLIN: Right.

MS. CLIFT: Forget race and gender. These are two talented politicians. They deserve --

MR. MCLAUGHLIN: Who should withdraw?

MS. CLIFT: Neither.

MR. ZUCKERMAN: Neither.

MR. MCLAUGHLIN: Neither.

MR. ZUCKERMAN: Neither.

MR. MCLAUGHLIN: So you changed your tune, Eleanor.

MS. CLIFT: I have never said anybody should withdraw.

MR. MCLAUGHLIN: Oh, I disagree. I thought I heard you a couple of weeks ago. MS. CROWLEY: Hillary ought to stay in this race. She's only 1 percent behind Barack Obama. Let it run its course.

MR. MCLAUGHLIN: Let it run. Let it roll. Let it click.

MS. FREELAND: I think that she should run, but I can understand why senior Democrats are worried about it.

MR. MCLAUGHLIN: Hillary should stay through Denver.

Issue Three -- The Promised Land.

MARTIN LUTHER KING JR.: (From videotape.) Like anybody, I would like to live a long life. Longevity has its place. But I'm not concerned about that now. I just want to do God's will. And he's allowed me to go up to the mountain. I've looked over and I've seen the promised land. I may not get there with you, but I want you to know tonight that we as a people will get to the promised land.

MR. MCLAUGHLIN: Question -- If Martin Luther King Jr. were alive today, what aspect of black progress would please him most? I ask you, Monica.

MS. CROWLEY: I think two things; first of all, the fact that we've had black secretaries of State and a really viable, for the first time, black presidential candidate who looks, in fact, like he will be his party's nominee.

MR. MCLAUGHLIN: Professional class, too.

MS. CROWLEY: Yes, absolutely. And I would say that the expanding middle class would also please him.

MR. MCLAUGHLIN: What do you think?

MS. FREELAND: I think also the fact that, particularly for the younger generation, maybe people under 30, we are starting to see an America where race seems to matter less. And it's really interesting, I think, to look at the young Obama supporters, where you really see them seeing him as a change candidate for themselves.

MR. MCLAUGHLIN: Right. What do you think would displease him the most or please him the least?

MS. CLIFT: Well, the fact that inner-city schools are subpar, the fact that --

MR. MCLAUGHLIN: The lower class has been left behind.

MS. CLIFT: And it's become more entrenched. MR. MCLAUGHLIN: Will Hillary stay or will she go?

MR. ZUCKERMAN: She will stay, and she should.

MS. CLIFT: If she doesn't win convincingly those last states --

MR. MCLAUGHLIN: Give me the answer.

MS. CLIFT: -- she will not take the fight to Denver.

MR. MCLAUGHLIN: What?

MS. CROWLEY: She will stay.

MS. FREELAND: She will stay.

MR. MCLAUGHLIN: She will stay.

Bye-bye.

END.
ill take months, if not years, when you have the SEC and the FDIC and the ICC and those alphabet-soup agencies fighting among themselves. I wouldn't worry about this being put in place, or maybe --

MR. ZUCKERMAN: They have a responsibility to start the national dialogue on this.

MS. CLIFT: He's beginning the conversation. He's beginning the conversation.

MR. ZUCKERMAN: Right.

MS. CLIFT: He deserves credit for that.

MR. ZUCKERMAN: Right.

MS. CLIFT: But it's not going to be concluded under this administration.

MS. FREELAND: But it's good to be opening up, and it's actually good that it's not going to be concluded under this administration --

MS. CROWLEY: And actually --

MS. FREELAND: -- because we don't want hasty recreation of the financial architecture.

MS. CLIFT: Don't worry about that.

MR. MCLAUGHLIN: I've got a question for you.

MS. CROWLEY: What you just talked about, Paulson has had on the drawing board for about a year. And it's only because of these crises that it actually forced the administration's hand to go out with its modernization of legal apparatus that we're talking about from the 1930s.

MR. MCLAUGHLIN: What's the impact of all of this vital but totally boring algebra on Joe Six-Pack? What is the impact? What's the impact? Are we heading towards a depression? A depression.

MR. ZUCKERMAN: No.

MS. CROWLEY: I know there was a British newspaper that had that headline today. But, no, I don't think it's quite that serious.

MR. ZUCKERMAN: No.

MS. CROWLEY: There are serious problems that are --

MR. MCLAUGHLIN: Is all of this going to do any good? Is the congressional plan going to do any good, the $15 billion? MS. CROWLEY: Look, what the federal government is doing tinkers at the margins. But what we're talking about, what we're all talking about here, are structural issues and problems that are much deeper. And it's going to be a longer time --

MR. MCLAUGHLIN: They're talking about a spreading credit crisis.

MS. CROWLEY: -- than the band-aid that the Congress is putting on it.

MR. MCLAUGHLIN: They're talking about the spreading credit crisis.

MS. CLIFT: This is a presidential --

MR. ZUCKERMAN: We will be able to save the credit system if the government acts adequately. In the 1930s, the role of the federal government in the economy was 3 percent. It's now 20 percent. We have a lot of countercyclical programs that will, in effect, be seven times as effective as they were in the 1930s.

Secondly, the Federal Reserve system back then had to diminish the money supply because people were withdrawing gold from the system and the Federal Reserve had to make it up. We're beyond that point. So the Federal Reserve is adding money to the system in order to keep liquidity, to the extent that they can. So it's very different from the 1930s. This is not to say we won't have a major recession. As you know, I said it on this program. It's going to go on for a longer period of time. It's going to be two years.

MR. MCLAUGHLIN: Do you think the Fed is going to run out of the kind of money that can save us from a recession or a depression?

MR. ZUCKERMAN: Certainly they'll save us from a depression. These people know -- Bernanke, after all, specializes --

MR. MCLAUGHLIN: That's the precise point of the exit question. The exit question is, has the spreading credit crisis been contained by Bernanke and Paulson, or is it still out of control?

MR. ZUCKERMAN: No, we're still in trouble. But they have managed to contain some of it. It has not collapsed.

MR. MCLAUGHLIN: Is it a temporary fix? Is it like a fire in a forest? You put out a fire in one place; it starts in another.

MR. ZUCKERMAN: Right. And we're going to have to do a lot more than we've done to date, and it's going to continue to snowball. MR. MCLAUGHLIN: Eleanor.

MS. CLIFT: It's finger in the dike, and the country is really losing any confidence in the government in its regulatory power. Look, the FAA has now been ignoring planes that can't fly safely. And when you have 81 percent of the country saying we're on the wrong track, there's a lot that's going wrong. And the breakdown of regulatory oversight by this administration will go down as one of the significant failures.

MS. CROWLEY: Yeah, and the truth is that the government is running out of tools. I saw a headline the other day that said, "Fed runs out of ammo; throws guns." (Laughter.)

MS. FREELAND: Actually, I think this is a very interesting moment, because I think, in the wake of the Bear Stearns bailout, what we are seeing is a real calming of the credit markets. And to your specific question of whether the credit crisis has been resolved, it's, for the first time, I think, possible to think that maybe the Wall Street crisis is beginning to be contained.

The big question right now is what's happening on Main Street and what the American consumer is going to be doing. And so Eleanor's point about the right track/wrong track survey is essential.

MR. MCLAUGHLIN: What are you saying --

MS. FREELAND: If we then --

MR. MCLAUGHLIN: What are you saying in your editorials in the Financial Times about all this and the action taken -- what you've given me now?

MS. FREELAND: What I just said, what I just said.

MR. MCLAUGHLIN: All of this Pollyannish stuff?

MS. FREELAND: No, it's not Pollyanna, because what I'm saying is it's important to be very specific about where you're looking. And if you're looking for the next problem, John, don't look to Wall Street right now; look to Main Street.

MR. MCLAUGHLIN: I agree with Eleanor. I think it's a finger in the dike.

Issue Two -- Democratic Convention, 1924.

Madison Square Garden, New York City, 84 years ago. The Democratic Party assembles at its 1924 convention, and the scene is history-making mayhem -- back-room deals, clench-fisted party bosses, smoke-filled rooms, and deadlocked votes -- a brokered convention. Believe it or not, it extended over 16 calendar days with nine long convention days and -- get this -- 103 ballots before the nominee was finally chosen, John W. Davis. In the general election, Davis lost, 54 percent to 28 percent, to Republican Calvin Coolidge.

1924 is a forecast of what may be in store for the Democrats in five short months at their August convention this year, starting August 25 in Denver, Colorado. Will that problem go away because Hillary will quit? Forget about it.

If Hillary wins the Pennsylvania primary two weeks from next Tuesday, as she well could, then goes on two weeks after that and wins both North Carolina and Indiana primaries, as she could, then Hillary will have the big "mo." And, like a legion of avenging angels, that big "mo" will alight from Barack to Hillary, and Barack won't quit. So it will then have to be settled on the convention floor, 1924 redivivus.

Question: What's wrong with a brokered convention? Eleanor.

MS. CLIFT: It generally leads to the loss of the nominee. (Laughs.)

MR. MCLAUGHLIN: You mean, Coolidge?

MS. CLIFT: Well, I mean Jimmy Carter in 1980. I mean Gerald Ford in 1976. And if a party is seen as divided, it generally erodes support in November.

MR. MCLAUGHLIN: Isn't there an offset?

MS. CLIFT: Yeah, there is.

MR. ZUCKERMAN: There is.

MS. CLIFT: And there are a lot of people getting excited. And it's wonderful if you live in Indiana or North Carolina.

MR. MCLAUGHLIN: Great TV. Great TV.

MS. CLIFT: You actually -- your vote matters this time. And if she does win those primaries you just outlined, and if she does surpass Obama in the popular vote, that is the threshold that the super-delegates are beginning to talk about.

I think the super-delegates will speak individually. In fact, they've begun speaking. Almost every day a super-delegate comes out for Barack Obama, and some of them are pretty major figures -- Lee Hamilton, co-chair of the 9/11 commission; Bob Casey, senator, Pennsylvania, pro-gun, pro-life, helps navigate the politics in that state.

MR. MCLAUGHLIN: But nothing can save her?

MS. CLIFT: No, what can save her is winning primaries, and winning big, and then she has a case to make.

MR. MCLAUGHLIN: Mort, what do you think?

MS. CLIFT: It's a long shot.

MR. ZUCKERMAN: Well, I have to say, I think that --

MR. MCLAUGHLIN: Do you think we're headed to the 1924 deal?

MR. ZUCKERMAN: No. I mean, I appreciate your home videos that you've put on the program, John.

MR. MCLAUGHLIN: National Archives.

MR. ZUCKERMAN: I will say that we are going to have that kind of convention. It is not the worst thing in the world. The whole purpose of, it seems to me, the super-delegates is that they will have a greater degree of personal knowledge of the candidates. That kind of peer-group assessment, in my judgment, has been lacking from our system. It is true of the British system and it works pretty well there. They will make their own independent judgments, I hope.

MS. FREELAND: I think the big difference between the British system or the Canadian system or any other system where you have actual delegates, mostly elected politicians, choosing the leader is in America you have primaries and you have opportunity for party members to vote. And that's what I think is the real difficulty of the brokered convention. If there is a perception that the elite, the establishment of the Democratic Party, goes against the will of the ordinary people, that will be a problem for the Democrats, particularly this year, when you've seen so much energy.

MS. CLIFT: If there is a deadlock, Al Gore is the default candidate, not Hillary Clinton.

MR. MCLAUGHLIN: Don't you think that -- MS. CROWLEY: Well, there's news.

MR. MCLAUGHLIN: Don't you think that there is a substantial offset to a brokered convention and whatever disunity it may cause, and that is the economy, and the economy is going to kill McCain, is it not?

MS. CROWLEY: Well, we just did the whole opening segment on this show about the drag that the economy is on the sitting president and on the Republican nominee.

MR. MCLAUGHLIN: So there's nothing, really, that the Democrats can do to impair their chances of taking over the White House.

MS. CROWLEY: Wait a minute. Wait a minute. I mean, given the situation, economically, the war in Iraq and so on, this should be -- whatever Democrat nominee should be running 10 points ahead of John McCain, and they're not. It's dead even. In some polls, even McCain is ahead.

MR. MCLAUGHLIN: Okay, how they fit now. Two months ago, there were three candidates in the Democratic race -- On the political left, John Edwards; in the political center, Barack Obama, as he seemed then; on the political right, Hillary Clinton.

In January, Edwards withdrew. Hillary stayed on the right. And the liberal wing of the Democratic Party usurped control and anointed Obama, with his 95.5 liberal rating, making him the most liberal of the 100 U.S. senators in 2007, as ranked by the National Journal.

With only two candidates now in the nomination race, Democratic liberals sprang into action, calling for Hillary to quit. They don't want 1924 all over again with the 2008 presidential election lost to the Republicans. Hillary dies for the party.

SEN. PATRICK LEAHY (D-VT): (From videotape.) There is no way that Senator Clinton is going to win enough delegates to get the nomination. She ought to withdraw and she ought to be backing Senator Obama.

SEN. JOHN KERRY (D-MA): (From videotape.) The important thing is to be fighting against John McCain and not to be destructive in this campaign, either campaign.

MR. MCLAUGHLIN: President Clinton repudiates these Hillary assassins.

FORMER PRESIDENT BILL CLINTON: (From videotape.) And all these people who tell you, "Oh, we need to shut this thing down now; the Democrats are so divided" -- that's a bunch of bull. We are strengthening the Democratic Party. Chill out. We're going to win this election if we just chill out and let everybody have their say. MR. MCLAUGHLIN: Question -- Is Bill right? And why are the party bosses trying to bully Hillary out of the race? I ask you, Chrystia.

MS. FREELAND: Well, I think it's pretty clear that the safe course for the Democratic Party right now would be if everyone could come together, if Hillary Clinton could very graciously and happily say --

MR. MCLAUGHLIN: This is not a static situation. We don't know what's going to happen over the next three months to Obama or Hillary.

MR. ZUCKERMAN: Absolutely.

MR. MCLAUGHLIN: We don't know what's going to be revealed.

MS. FREELAND: John, if you want to know why someone like Bob Casey, why someone like John Kerry, is saying this, this is why. It's an anxious moment for them. And if the Democrats were to lose --

MR. MCLAUGHLIN: We've got 10 seconds left -- 10 seconds. I want to start with you -- 10 seconds. What do you want to say?

MR. ZUCKERMAN: I absolutely do not think Hillary should withdraw.

MS. CLIFT: No. Right.

MR. ZUCKERMAN: They ignore the first --

MR. MCLAUGHLIN: Right.

MS. CLIFT: Forget race and gender. These are two talented politicians. They deserve --

MR. MCLAUGHLIN: Who should withdraw?

MS. CLIFT: Neither.

MR. ZUCKERMAN: Neither.

MR. MCLAUGHLIN: Neither.

MR. ZUCKERMAN: Neither.

MR. MCLAUGHLIN: So you changed your tune, Eleanor.

MS. CLIFT: I have never said anybody should withdraw.

MR. MCLAUGHLIN: Oh, I disagree. I thought I heard you a couple of weeks ago. MS. CROWLEY: Hillary ought to stay in this race. She's only 1 percent behind Barack Obama. Let it run its course.

MR. MCLAUGHLIN: Let it run. Let it roll. Let it click.

MS. FREELAND: I think that she should run, but I can understand why senior Democrats are worried about it.

MR. MCLAUGHLIN: Hillary should stay through Denver.

Issue Three -- The Promised Land.

MARTIN LUTHER KING JR.: (From videotape.) Like anybody, I would like to live a long life. Longevity has its place. But I'm not concerned about that now. I just want to do God's will. And he's allowed me to go up to the mountain. I've looked over and I've seen the promised land. I may not get there with you, but I want you to know tonight that we as a people will get to the promised land.

MR. MCLAUGHLIN: Question -- If Martin Luther King Jr. were alive today, what aspect of black progress would please him most? I ask you, Monica.

MS. CROWLEY: I think two things; first of all, the fact that we've had black secretaries of State and a really viable, for the first time, black presidential candidate who looks, in fact, like he will be his party's nominee.

MR. MCLAUGHLIN: Professional class, too.

MS. CROWLEY: Yes, absolutely. And I would say that the expanding middle class would also please him.

MR. MCLAUGHLIN: What do you think?

MS. FREELAND: I think also the fact that, particularly for the younger generation, maybe people under 30, we are starting to see an America where race seems to matter less. And it's really interesting, I think, to look at the young Obama supporters, where you really see them seeing him as a change candidate for themselves.

MR. MCLAUGHLIN: Right. What do you think would displease him the most or please him the least?

MS. CLIFT: Well, the fact that inner-city schools are subpar, the fact that --

MR. MCLAUGHLIN: The lower class has been left behind.

MS. CLIFT: And it's become more entrenched. MR. MCLAUGHLIN: Will Hillary stay or will she go?

MR. ZUCKERMAN: She will stay, and she should.

MS. CLIFT: If she doesn't win convincingly those last states --

MR. MCLAUGHLIN: Give me the answer.

MS. CLIFT: -- she will not take the fight to Denver.

MR. MCLAUGHLIN: What?

MS. CROWLEY: She will stay.

MS. FREELAND: She will stay.

MR. MCLAUGHLIN: She will stay.

Bye-bye.

END.
ill take months, if not years, when you have the SEC and the FDIC and the ICC and those alphabet-soup agencies fighting among themselves. I wouldn't worry about this being put in place, or maybe --

MR. ZUCKERMAN: They have a responsibility to start the national dialogue on this.

MS. CLIFT: He's beginning the conversation. He's beginning the conversation.

MR. ZUCKERMAN: Right.

MS. CLIFT: He deserves credit for that.

MR. ZUCKERMAN: Right.

MS. CLIFT: But it's not going to be concluded under this administration.

MS. FREELAND: But it's good to be opening up, and it's actually good that it's not going to be concluded under this administration --

MS. CROWLEY: And actually --

MS. FREELAND: -- because we don't want hasty recreation of the financial architecture.

MS. CLIFT: Don't worry about that.

MR. MCLAUGHLIN: I've got a question for you.

MS. CROWLEY: What you just talked about, Paulson has had on the drawing board for about a year. And it's only because of these crises that it actually forced the administration's hand to go out with its modernization of legal apparatus that we're talking about from the 1930s.

MR. MCLAUGHLIN: What's the impact of all of this vital but totally boring algebra on Joe Six-Pack? What is the impact? What's the impact? Are we heading towards a depression? A depression.

MR. ZUCKERMAN: No.

MS. CROWLEY: I know there was a British newspaper that had that headline today. But, no, I don't think it's quite that serious.

MR. ZUCKERMAN: No.

MS. CROWLEY: There are serious problems that are --

MR. MCLAUGHLIN: Is all of this going to do any good? Is the congressional plan going to do any good, the $15 billion? MS. CROWLEY: Look, what the federal government is doing tinkers at the margins. But what we're talking about, what we're all talking about here, are structural issues and problems that are much deeper. And it's going to be a longer time --

MR. MCLAUGHLIN: They're talking about a spreading credit crisis.

MS. CROWLEY: -- than the band-aid that the Congress is putting on it.

MR. MCLAUGHLIN: They're talking about the spreading credit crisis.

MS. CLIFT: This is a presidential --

MR. ZUCKERMAN: We will be able to save the credit system if the government acts adequately. In the 1930s, the role of the federal government in the economy was 3 percent. It's now 20 percent. We have a lot of countercyclical programs that will, in effect, be seven times as effective as they were in the 1930s.

Secondly, the Federal Reserve system back then had to diminish the money supply because people were withdrawing gold from the system and the Federal Reserve had to make it up. We're beyond that point. So the Federal Reserve is adding money to the system in order to keep liquidity, to the extent that they can. So it's very different from the 1930s. This is not to say we won't have a major recession. As you know, I said it on this program. It's going to go on for a longer period of time. It's going to be two years.

MR. MCLAUGHLIN: Do you think the Fed is going to run out of the kind of money that can save us from a recession or a depression?

MR. ZUCKERMAN: Certainly they'll save us from a depression. These people know -- Bernanke, after all, specializes --

MR. MCLAUGHLIN: That's the precise point of the exit question. The exit question is, has the spreading credit crisis been contained by Bernanke and Paulson, or is it still out of control?

MR. ZUCKERMAN: No, we're still in trouble. But they have managed to contain some of it. It has not collapsed.

MR. MCLAUGHLIN: Is it a temporary fix? Is it like a fire in a forest? You put out a fire in one place; it starts in another.

MR. ZUCKERMAN: Right. And we're going to have to do a lot more than we've done to date, and it's going to continue to snowball. MR. MCLAUGHLIN: Eleanor.

MS. CLIFT: It's finger in the dike, and the country is really losing any confidence in the government in its regulatory power. Look, the FAA has now been ignoring planes that can't fly safely. And when you have 81 percent of the country saying we're on the wrong track, there's a lot that's going wrong. And the breakdown of regulatory oversight by this administration will go down as one of the significant failures.

MS. CROWLEY: Yeah, and the truth is that the government is running out of tools. I saw a headline the other day that said, "Fed runs out of ammo; throws guns." (Laughter.)

MS. FREELAND: Actually, I think this is a very interesting moment, because I think, in the wake of the Bear Stearns bailout, what we are seeing is a real calming of the credit markets. And to your specific question of whether the credit crisis has been resolved, it's, for the first time, I think, possible to think that maybe the Wall Street crisis is beginning to be contained.

The big question right now is what's happening on Main Street and what the American consumer is going to be doing. And so Eleanor's point about the right track/wrong track survey is essential.

MR. MCLAUGHLIN: What are you saying --

MS. FREELAND: If we then --

MR. MCLAUGHLIN: What are you saying in your editorials in the Financial Times about all this and the action taken -- what you've given me now?

MS. FREELAND: What I just said, what I just said.

MR. MCLAUGHLIN: All of this Pollyannish stuff?

MS. FREELAND: No, it's not Pollyanna, because what I'm saying is it's important to be very specific about where you're looking. And if you're looking for the next problem, John, don't look to Wall Street right now; look to Main Street.

MR. MCLAUGHLIN: I agree with Eleanor. I think it's a finger in the dike.

Issue Two -- Democratic Convention, 1924.

Madison Square Garden, New York City, 84 years ago. The Democratic Party assembles at its 1924 convention, and the scene is history-making mayhem -- back-room deals, clench-fisted party bosses, smoke-filled rooms, and deadlocked votes -- a brokered convention. Believe it or not, it extended over 16 calendar days with nine long convention days and -- get this -- 103 ballots before the nominee was finally chosen, John W. Davis. In the general election, Davis lost, 54 percent to 28 percent, to Republican Calvin Coolidge.

1924 is a forecast of what may be in store for the Democrats in five short months at their August convention this year, starting August 25 in Denver, Colorado. Will that problem go away because Hillary will quit? Forget about it.

If Hillary wins the Pennsylvania primary two weeks from next Tuesday, as she well could, then goes on two weeks after that and wins both North Carolina and Indiana primaries, as she could, then Hillary will have the big "mo." And, like a legion of avenging angels, that big "mo" will alight from Barack to Hillary, and Barack won't quit. So it will then have to be settled on the convention floor, 1924 redivivus.

Question: What's wrong with a brokered convention? Eleanor.

MS. CLIFT: It generally leads to the loss of the nominee. (Laughs.)

MR. MCLAUGHLIN: You mean, Coolidge?

MS. CLIFT: Well, I mean Jimmy Carter in 1980. I mean Gerald Ford in 1976. And if a party is seen as divided, it generally erodes support in November.

MR. MCLAUGHLIN: Isn't there an offset?

MS. CLIFT: Yeah, there is.

MR. ZUCKERMAN: There is.

MS. CLIFT: And there are a lot of people getting excited. And it's wonderful if you live in Indiana or North Carolina.

MR. MCLAUGHLIN: Great TV. Great TV.

MS. CLIFT: You actually -- your vote matters this time. And if she does win those primaries you just outlined, and if she does surpass Obama in the popular vote, that is the threshold that the super-delegates are beginning to talk about.

I think the super-delegates will speak individually. In fact, they've begun speaking. Almost every day a super-delegate comes out for Barack Obama, and some of them are pretty major figures -- Lee Hamilton, co-chair of the 9/11 commission; Bob Casey, senator, Pennsylvania, pro-gun, pro-life, helps navigate the politics in that state.

MR. MCLAUGHLIN: But nothing can save her?

MS. CLIFT: No, what can save her is winning primaries, and winning big, and then she has a case to make.

MR. MCLAUGHLIN: Mort, what do you think?

MS. CLIFT: It's a long shot.

MR. ZUCKERMAN: Well, I have to say, I think that --

MR. MCLAUGHLIN: Do you think we're headed to the 1924 deal?

MR. ZUCKERMAN: No. I mean, I appreciate your home videos that you've put on the program, John.

MR. MCLAUGHLIN: National Archives.

MR. ZUCKERMAN: I will say that we are going to have that kind of convention. It is not the worst thing in the world. The whole purpose of, it seems to me, the super-delegates is that they will have a greater degree of personal knowledge of the candidates. That kind of peer-group assessment, in my judgment, has been lacking from our system. It is true of the British system and it works pretty well there. They will make their own independent judgments, I hope.

MS. FREELAND: I think the big difference between the British system or the Canadian system or any other system where you have actual delegates, mostly elected politicians, choosing the leader is in America you have primaries and you have opportunity for party members to vote. And that's what I think is the real difficulty of the brokered convention. If there is a perception that the elite, the establishment of the Democratic Party, goes against the will of the ordinary people, that will be a problem for the Democrats, particularly this year, when you've seen so much energy.

MS. CLIFT: If there is a deadlock, Al Gore is the default candidate, not Hillary Clinton.

MR. MCLAUGHLIN: Don't you think that -- MS. CROWLEY: Well, there's news.

MR. MCLAUGHLIN: Don't you think that there is a substantial offset to a brokered convention and whatever disunity it may cause, and that is the economy, and the economy is going to kill McCain, is it not?

MS. CROWLEY: Well, we just did the whole opening segment on this show about the drag that the economy is on the sitting president and on the Republican nominee.

MR. MCLAUGHLIN: So there's nothing, really, that the Democrats can do to impair their chances of taking over the White House.

MS. CROWLEY: Wait a minute. Wait a minute. I mean, given the situation, economically, the war in Iraq and so on, this should be -- whatever Democrat nominee should be running 10 points ahead of John McCain, and they're not. It's dead even. In some polls, even McCain is ahead.

MR. MCLAUGHLIN: Okay, how they fit now. Two months ago, there were three candidates in the Democratic race -- On the political left, John Edwards; in the political center, Barack Obama, as he seemed then; on the political right, Hillary Clinton.

In January, Edwards withdrew. Hillary stayed on the right. And the liberal wing of the Democratic Party usurped control and anointed Obama, with his 95.5 liberal rating, making him the most liberal of the 100 U.S. senators in 2007, as ranked by the National Journal.

With only two candidates now in the nomination race, Democratic liberals sprang into action, calling for Hillary to quit. They don't want 1924 all over again with the 2008 presidential election lost to the Republicans. Hillary dies for the party.

SEN. PATRICK LEAHY (D-VT): (From videotape.) There is no way that Senator Clinton is going to win enough delegates to get the nomination. She ought to withdraw and she ought to be backing Senator Obama.

SEN. JOHN KERRY (D-MA): (From videotape.) The important thing is to be fighting against John McCain and not to be destructive in this campaign, either campaign.

MR. MCLAUGHLIN: President Clinton repudiates these Hillary assassins.

FORMER PRESIDENT BILL CLINTON: (From videotape.) And all these people who tell you, "Oh, we need to shut this thing down now; the Democrats are so divided" -- that's a bunch of bull. We are strengthening the Democratic Party. Chill out. We're going to win this election if we just chill out and let everybody have their say. MR. MCLAUGHLIN: Question -- Is Bill right? And why are the party bosses trying to bully Hillary out of the race? I ask you, Chrystia.

MS. FREELAND: Well, I think it's pretty clear that the safe course for the Democratic Party right now would be if everyone could come together, if Hillary Clinton could very graciously and happily say --

MR. MCLAUGHLIN: This is not a static situation. We don't know what's going to happen over the next three months to Obama or Hillary.

MR. ZUCKERMAN: Absolutely.

MR. MCLAUGHLIN: We don't know what's going to be revealed.

MS. FREELAND: John, if you want to know why someone like Bob Casey, why someone like John Kerry, is saying this, this is why. It's an anxious moment for them. And if the Democrats were to lose --

MR. MCLAUGHLIN: We've got 10 seconds left -- 10 seconds. I want to start with you -- 10 seconds. What do you want to say?

MR. ZUCKERMAN: I absolutely do not think Hillary should withdraw.

MS. CLIFT: No. Right.

MR. ZUCKERMAN: They ignore the first --

MR. MCLAUGHLIN: Right.

MS. CLIFT: Forget race and gender. These are two talented politicians. They deserve --

MR. MCLAUGHLIN: Who should withdraw?

MS. CLIFT: Neither.

MR. ZUCKERMAN: Neither.

MR. MCLAUGHLIN: Neither.

MR. ZUCKERMAN: Neither.

MR. MCLAUGHLIN: So you changed your tune, Eleanor.

MS. CLIFT: I have never said anybody should withdraw.

MR. MCLAUGHLIN: Oh, I disagree. I thought I heard you a couple of weeks ago. MS. CROWLEY: Hillary ought to stay in this race. She's only 1 percent behind Barack Obama. Let it run its course.

MR. MCLAUGHLIN: Let it run. Let it roll. Let it click.

MS. FREELAND: I think that she should run, but I can understand why senior Democrats are worried about it.

MR. MCLAUGHLIN: Hillary should stay through Denver.

Issue Three -- The Promised Land.

MARTIN LUTHER KING JR.: (From videotape.) Like anybody, I would like to live a long life. Longevity has its place. But I'm not concerned about that now. I just want to do God's will. And he's allowed me to go up to the mountain. I've looked over and I've seen the promised land. I may not get there with you, but I want you to know tonight that we as a people will get to the promised land.

MR. MCLAUGHLIN: Question -- If Martin Luther King Jr. were alive today, what aspect of black progress would please him most? I ask you, Monica.

MS. CROWLEY: I think two things; first of all, the fact that we've had black secretaries of State and a really viable, for the first time, black presidential candidate who looks, in fact, like he will be his party's nominee.

MR. MCLAUGHLIN: Professional class, too.

MS. CROWLEY: Yes, absolutely. And I would say that the expanding middle class would also please him.

MR. MCLAUGHLIN: What do you think?

MS. FREELAND: I think also the fact that, particularly for the younger generation, maybe people under 30, we are starting to see an America where race seems to matter less. And it's really interesting, I think, to look at the young Obama supporters, where you really see them seeing him as a change candidate for themselves.

MR. MCLAUGHLIN: Right. What do you think would displease him the most or please him the least?

MS. CLIFT: Well, the fact that inner-city schools are subpar, the fact that --

MR. MCLAUGHLIN: The lower class has been left behind.

MS. CLIFT: And it's become more entrenched. MR. MCLAUGHLIN: Will Hillary stay or will she go?

MR. ZUCKERMAN: She will stay, and she should.

MS. CLIFT: If she doesn't win convincingly those last states --

MR. MCLAUGHLIN: Give me the answer.

MS. CLIFT: -- she will not take the fight to Denver.

MR. MCLAUGHLIN: What?

MS. CROWLEY: She will stay.

MS. FREELAND: She will stay.

MR. MCLAUGHLIN: She will stay.

Bye-bye.

END.