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MR. MCLAUGHLIN: Issue One: Has the Storm Passed?

The panic in world credit markets reached historic intensity during the past two weeks. It prompted a flight to safety of the kind not seen since the Second World War. The Wall Street saga took off on Sunday, September the 7th. The U.S. government seized Fannie and Freddie Mac, the guarantors of $5 trillion in home loans. They used to be a structural oddity -- public and private at the same time. Now they are public only.

Here's the rationale for the government takeover.

HENRY PAULSON (U.S. Treasury secretary): (From videotape.) Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in the financial markets here at home and around the globe.

MR. MCLAUGHLIN: Well, presidential Republican nominee Senator John McCain believes that Fannie and Freddie have already caused great turmoil, and worse, at home and abroad.

SEN. JOHN MCCAIN (R-AZ, Republican presidential nominee): (From videotape.) Two years ago, I warned this administration and Congress that regulations for our home loan agencies, Fannie Mae and Freddie Mac, needed to be fixed.

When I pushed legislation to reform Fannie Mae and Freddie Mac, Senator Obama was silent. He didn't lift a finger to avert this crisis while the leaders of Fannie and Freddie were lining the pockets of his campaign and they were sowing the seeds of the financial crisis we see today, and they also enriched themselves with millions of dollars in payments. That's not change. That's what's broken in Washington today, my friends.

You know, Senator Obama talks a tough game on the financial markets. But the facts tell a very different story. He took more money from Fannie and Freddie than any senator except the Democratic chairman of the committee that regulates them.

The chairman of the SEC serves at the appointment of the president, and in my view has betrayed the public trust. If I were president today, I would fire him.

MR. MCLAUGHLIN: Question: Is McCain giving it to us straight? Did Obama get payola in exchange for resisting any reform of Fannie and Freddie? Meanwhile, McCain was working hard pursuing the reform of Fannie and Freddie. Pat Buchanan.

MR. BUCHANAN: What you saw, John, is a tremendous recovery by John McCain, who started the week saying, "The economy is fundamentally sound," in good Herbert Hoover language, as the whole thing was collapsing. He moved into his populist role, the firing of Chris Cox at the SEC. Now he's against Obama.

But I'll tell you, what has happened this week is at week's end, Bush and Paulson and Bernanke have moved dramatically with what could be easily a trillion-dollar bailout. In the last two days of the week there's been almost a trillion-dollar gain on the market. I think they may have saved an immense collapse here. They certainly have done that temporarily. I've seen some British banks that have gone up -- and I'm invested in them -- gone up 35 and 50 percent.

MR. MCLAUGHLIN: Barclay's.

MR. BUCHANAN: Barclay's and Royal Bank of Scotland. So I think they may have saved it. And, look, there's an awful lot of horrible things went on here. There's been corruption. There's been -- you know, I don't say it's payola, but mistakes have been made. Blunders have been made. But I'll tell you what, in the final analysis, we're going to have to save the pigs, Eleanor, in order to save ourselves. (Laughs.)

MS. CLIFT: (Laughs.)

MR. MCLAUGHLIN: I think that sums it all up. I think we can move on now, right?

MS. CLIFT: Right.

MR. MCLAUGHLIN: Okay. Obama counterstrikes.

SEN. BARACK OBAMA (D-IL, Democratic presidential nominee): (From videotape.) He's calling for the firing of the Securities and Exchange Commission. Well, I think that's all fine and good, but here's what I think. In the next 47 days, you can fire the whole trickle-down, on-your-own, look-the-other-way crowd in Washington who has led us down this disastrous path.

Don't just get rid of one guy. Get rid of this administration. Get rid of this philosophy. Get rid of the do-nothing approach to our economic problems and put somebody in there who's going to fight for you.

Let's be clear. Let's be clear. What we have seen in the last few days is nothing less than the final verdict on an economic philosophy that has completely failed. It is George Bush's philosophy. It is John McCain's philosophy.

MR. MCLAUGHLIN: Question: Is Obama's rejoinder politically effective? I ask you, Eleanor.

MS. CLIFT: Well, I'm glad he got back on the issue of John McCain firing the SEC chairman. That's not allowed. FDR tried something similar and the Supreme Court said that's unconstitutional. So John McCain better study up on his history a little bit.

And secondly, McCain is reinventing himself on a daily basis, running away from his past as a Republican and trying to issue himself as a new Teddy Roosevelt populist. The Wall Street Journal is going bananas. They don't like it. And he is going to expose divisions within the Republican Party, who are getting nervous he might go a little bit too far.

But, look, since the 1930s -- and you brought up Hoover first -- economic distress has played to the advantage of Democrats. The guys in charge of the Republicans, they championed deregulation in the free markets, and now it has all fell apart and they've had to virtually nationalize the financial structure of this country. That is not a platform that is a winning platform for any Republican. MS. CROWLEY: Look, we're in a very highly charged political season. This is a presidential election year. I do not think that John McCain needs to reinvent himself, because he has always been a reformer, for 25 years while he's been the Congress.

When people say that nobody was raising the warning signs here, that nobody was screaming about what was happening, there were two people, one of whom is Mort Zuckerman, sitting on this panel, over a year ago talking about the contagion that was beginning from Fannie and Freddie and the corruption and the excesses happening in those quasi-governmental institutions. And one of the other high-profile guys screaming and raising the boom and raising the warnings was John McCain. He is eminently credible on this when he raises these issues.

Barack Obama coming out and talking about cleaning house, the administration and so on, Barack Obama was the second-highest recipient of donations from Fannie and Freddie. First, of course, was Chris Dodd, who's the head of the Senate Banking Committee. So to be legitimate on these issues -- and I understand the politics of this -- but Barack Obama ought to be very careful about where he's casting stones.


MR. ZUCKERMAN: Well, the single greatest contributor to the housing bubble was Fannie and Freddie. And everybody knew that Fannie and Freddie was -- they were two institutions, two government- sponsored enterprises, that were out of control in terms -- they made over $600 billion of investments in subprime mortgages in the first six years of this century, and that contributed mightily to what we are all now having to deal with. And Paulson, when he said the core of the problem was the collapse of housing, that's where it all started, in the subprime field. And in fairness, Obama did nothing on that.

However, Cox, the SEC commissioner, was the man who sat there while they doubled and even tripled --


MR. ZUCKERMAN: -- the ability of financial houses to use leverage. They went from a maximum of 12 to 1 to as high as 40 to 1.

MR. BUCHANAN: This was what -- MR. ZUCKERMAN: And this was the core of what happened on the other side, which was the overuse of leverage --

MR. BUCHANAN: (Inaudible.)

MR. MCLAUGHLIN: Let him finish.

MR. ZUCKERMAN: -- overuse of leverage that compounded the problem in the housing world, and vice versa. That's what we're dealing with. There are two problems.

MR. MCLAUGHLIN: Do you want to talk about Cox's predecessor, Franklin Raines, and his --

MR. BUCHANAN: No, no. He was at Fannie --

MR. ZUCKERMAN: No, no, no. He was at Fannie --

MR. BUCHANAN: He was fined $35 million on Friday.


MR. BUCHANAN: He gave up a $35 million fine, as I understand it, on Friday; Franklin Raines did. His successor -- who was it? Jim Jones was in there.

MR. ZUCKERMAN: Jim Jones --

MR. MCLAUGHLIN: What's the point? What's the point?

MR. BUCHANAN: The point is this is a Democratic scandal at Freddie Mae -- or Fannie Mae and Freddie Mac.

MS. CLIFT: (Laughs.) Oh, come on. This is a Republican --

MR. ZUCKERMAN: No, no, no. No, no, no.

MR. MCLAUGHLIN: Wait a minute, Eleanor. Did Cox clean it up?

MR. ZUCKERMAN: Cox is on the SEC. The SEC has no jurisdiction over Fannie and Freddie, as a practical matter. The Congress did. The Congress refused to regulate them, even though people like McCain said, "You've got to regulate them," and not only McCain. I mean, this started in the Democratic administration. It was a Democratic honey pot.

MS. CLIFT: Excuse me.

MR. ZUCKERMAN: Let me just finish, if I may.

MS. CLIFT: Yes, you may.

MR. ZUCKERMAN: Okay, this was a huge -- MS. CLIFT: And then may I --

MR. ZUCKERMAN: It's $6 trillion. We're talking 6,000 billion dollars. That was the single greatest contributor to the speculation in the housing world. The other side of it was the overuse of leverage by the financial --

MR. MCLAUGHLIN: Wait a minute. Wait a minute.

MR. ZUCKERMAN: Cox was responsible for that.

MS. CLIFT: Uh --

MR. MCLAUGHLIN: Wait a minute, Eleanor. Did McCain call for the resignation of Chris Cox --


MR. MCLAUGHLIN: -- from the Securities and Exchange Commission?

MR. ZUCKERMAN: Yes, he did.


MR. ZUCKERMAN: Because they changed the regulations or relieved the regulations that would have contained the leverage or the excess borrowing or the excessive use of debt in all of Wall Street, particularly the top five firms. They gave them special treatment. Morgan Stanley, Goldman Sachs has still survived; Lehman Brothers, Merrill Lynch and Bear Stearns, who no longer survived. Three out of the five blew up, and that is a testament to what they allowed them to do.


MS. CLIFT: Before we conclude that Barack Obama is responsible for the financial collapse, I'd like to --

MR. ZUCKERMAN: We didn't conclude that. That's not what I said -- not even close.

MS. CLIFT: You pretty much were saying it.

MR. ZUCKERMAN: No, I didn't -- not even pretty much.

MS. CLIFT: He got more --

MR. ZUCKERMAN: He was one of many senators.

MS. CLIFT: He was --

MR. ZUCKERMAN: Do not tell me what I said, please. MS. CLIFT: He was one of many senators in both parties, and --

MR. ZUCKERMAN: He was the second-largest recipient of contributions, and he didn't vote in favor of it and McCain went the other way. At least give him credit for that.

MS. CLIFT: And if he is so powerful, then he must be responsible for this whole thing.

MR. ZUCKERMAN: I didn't say he was powerful.

MS. CLIFT: And poor John McCain must be ineffectual if he couldn't stop it. Look, this is an equal-opportunity scandal between both parties. They are intertwined with Wall Street, intertwined with Freddie Mae -- Fannie Mae and Freddie Mac. Rick Davis, the campaign manager for John McCain --

MR. BUCHANAN: Right, but Eleanor --

MS. CLIFT: Excuse me. Let me finish.

MR. BUCHANAN: Well, why did you trash --

MS. CLIFT: Let me finish -- lobbied against regulating these government entities. There is plenty of blame to go around.

MR. BUCHANAN: My question --

MS. CLIFT: And we had a nice moment in this country the other night when the members of Congress of both parties stood with the Treasury secretary and the Federal Reserve chairman.

MR. BUCHANAN: All right, are you done?


MR. BUCHANAN: Why, then --

MR. MCLAUGHLIN: We've got to get out. MS. CLIFT: And that's what we need to do. It's too serious for politics.

MR. BUCHANAN: It's a question for you, Eleanor. Why, then, did you trash the Republican philosophy for the entire thing, which you just did in your opening remarks, if it's bipartisan?

MS. CLIFT: Because -- yes, because the philosophy goes back to 1980. And the members of Congress --

MR. BUCHANAN: So it's Reagan.

MS. CLIFT: Yes, Reagan, and deregulation. Government is not part of the solution; it's the problem. That's been the philosophy. Now, all of a sudden, government is the solution.

MR. MCLAUGHLIN: Okay, let me move on. If I had known that Fannie and Freddie would have produced this stir, we would have gotten to it a lot earlier. (Laughter.) My God.

Okay. A McCain gaffe?

SEN. MCCAIN: (From videotape.) Our economy, I think, still the fundamentals of our economy are strong.

MR. MCLAUGHLIN: McCain says the fundamentals of our economy are strong. Is that a gaffe? Watch.

SEN. MCCAIN: (From videotape.) This foundation of our economy, the American worker, is strong.

MR. MCLAUGHLIN: Question: Is McCain solving the problem he created when he says that the American worker is the foundation, presumably the collective fundamentals, of the economy? Does that give him cover, Monica?

MS. CROWLEY: Well, he tried to clean up his initial comment there. But what you didn't play, the second part of his clip was, "The fundamentals of the economy are strong," and then he said, "but we are in very, very difficult times," which nobody played, including you.

He was talking about -- he tried to say he was talking about the American worker. But there are elements in this economy, which is vast and complex, that do remain strong; that is, worker productivity, unemployment, which is starting to tick up, still remains at historical lows. Exports remain very high. There is a more favorable trade balance going on, which is producing this growth that we saw in the last quarter of 3.3 percent.

I'm not saying that politically it was a very smart thing for him to say. He tried to clean it up. And he wasn't entirely wrong when he made that comment. MR. BUCHANAN: We've got a huge trade deficit. What it's like saying is, "Look, the organs of the body, most all of them are in great shape. The heart has just seized up badly."


MR. BUCHANAN: We were almost going under last Monday, quite frankly.

MR. MCLAUGHLIN: Is there a connection between the Wall Street havoc -- this is a set-up for you, Buchanan, again -- the Wall Street havoc and globalism?

MR. BUCHANAN: Well, of course it is.

MR. MCLAUGHLIN: Pat Buchanan.

MR. BUCHANAN: Of course it is. This went all over the world. There's a little bank in England that went down early from the subprime thing.

MR. ZUCKERMAN: Northern Rock.

MR. BUCHANAN: This spreads. This is like a cancer that metastasizes immediately because of globalization and because we're no longer economic nationalists and independent, the way we once were.

MR. MCLAUGHLIN: Are we talking about the Singapore exchange, the Tokyo exchange, the Bonn exchange?

MR. ZUCKERMAN: Everything.

MR. MCLAUGHLIN: Are we talking about the London exchange?

MR. ZUCKERMAN: John, John --


MR. MCLAUGHLIN: I want to hear from Mort.

MR. BUCHANAN: China lost 70 percent.

MR. MCLAUGHLIN: Wait a minute. I want to hear from Mort.

MR. ZUCKERMAN: We exported trillions of dollars of this subprime and mortgage paper around the world. Every major bank in the world holds this paper. And if it had gone under, it would have been a catastrophe around the world. It would have caused a run on the dollar.

MR. MCLAUGHLIN: Is that phenomenon going to create any kind of a momentum, a negative momentum, to keep our crisis here going? MR. ZUCKERMAN: Well, without question, if Europe and Asia -- China has a couple of trillion dollars of our assets. If those assets turn out to be worth a lot less, it's going to have a big effect on us. Sovereign funds have been pouring money into this country in order to save the banking system.

If that stops, it's going to hurt us.

MS. CLIFT: Yeah, and --

MR. ZUCKERMAN: So we are an international financial world now. That's inescapable.

MS. CLIFT: You didn't mention the $85 billion bridge loan to AIG, because they insure banks and financial entities all around the world. And if banks stop lending to ordinary people and stop lending to each other, the whole financial system just seizes up.

MR. MCLAUGHLIN: Do you approve of the Fannie-Freddie loan to the --

MR. BUCHANAN: Bailout?

MR. MCLAUGHLIN: -- bailout for AIG?

MS. CLIFT: I think there was a desperation here that all of this had to be done. But I do not approve of the golden parachutes, and I think they've stepped in on that.

MR. ZUCKERMAN: I agree with that.

MS. CLIFT: And one of John McCain's advisers, Carly Fiorina --

MR. MCLAUGHLIN: You know that Biden is --

MS. CLIFT: -- got a $40 million golden parachute.

MR. MCLAUGHLIN: -- opposed to the AIG bailout. It is equivalent to a de facto seizure, is it not?

MR. ZUCKERMAN: Of AIG, yes. In effect, they got 80 percent of the country.

MR. MCLAUGHLIN: All right. Now, Biden disapproves of that.

MR. ZUCKERMAN: Well, he may disapprove of it. If that's the case, he doesn't know what the transaction was and what the consequences will be. MR. MCLAUGHLIN: Okay.

MR. ZUCKERMAN: It would have caused a worldwide --

MR. BUCHANAN: We had no choice, John.

MR. MCLAUGHLIN: Put that in writing and we'll see that he gets it.

Issue Two: Joltin' Joe and Sainted Sarah.

SEN. JOSEPH BIDEN (D-DE, Democratic vice presidential nominee): (From videotape.) The American worker is strong. They've been betrayed. They've been betrayed not only by Wall Street but by this administration's policies and the policies John has supported.

This has been a Republican philosophy of letting Wall Street do what they want and the middle class be damned. It's about time we change it. And if I sound like I'm angry, I am fighting mad for middle-class people who have been the scapegoat of this economy because of the policies of the McCains and the Bushes.

MR. MCLAUGHLIN: Question: Is Biden genuinely a populist, or is this political posturing? I ask you, Eleanor.

MS. CLIFT: I think it's a little bit of both. I think he does have middle-class DNA and he is still the boy from Scranton and all that. But he also represents a state that is heavily involved in the credit card industry, and he's probably signed on to some legislation that doesn't pass the populist label.

MR. MCLAUGHLIN: You mean, Delaware is a fire-free zone for corporations?

MS. CLIFT: And the point is that all of Washington, there is an intertwining here, and it's intertwined with campaign contributions and all of that. Nobody's hands are clean. John McCain's hands are not clean. Barack Obama hasn't been here long enough to get too sullied, but he's not totally pure either. You have to ask, though, who do you trust more to change the economy away from George W. Bush? And the polls show that 62 to 30-something --

MR. MCLAUGHLIN: You know that the National Journal put together a liberal listing, 1 to 100, senators and that Barack Obama is the number one liberal of 100 senators. I'm not finished. Just a moment.

MS. CLIFT: Right.


MR. MCLAUGHLIN: I see you warming up over there. (Laughter.) Number three is Joe Biden. So we have pretty much the perfect liberal ticket. Is that a fair statement? MS. CLIFT: We have --

MR. BUCHANAN: The number two, I believe, is Bernie Sanders, and he's a socialist. (Laughter.)

MS. CLIFT: But we have the perfect -- it's perfectly timed, because we're now witnessing a debunking of the Republican philosophy of letting the markets run unfettered. So we need some good liberals in there.

MR. BUCHANAN: We've got some socialism too, and the takeover of all these -- the nationalization of AIG and Bear Stearns, all these other things; socialism.

MS. CLIFT: That's on the Republican side.

MR. MCLAUGHLIN: Okay. Republican vice presidential candidate Sarah Palin says that the oversight regime that regulates Wall Street needs to be modernized.

ALASKA GOVERNOR SARAH PALIN (Republican vice presidential nominee): (From videotape.) It's a 1930s type of regulatory regime overseeing some of these corporations, and we've got to get a more coordinated and a much more stringent oversight regime.

MR. MCLAUGHLIN: So what's the regime?

GOV. SARAH: (From videotape.) First and foremost, taxpayers cannot be looked to as the bailout, as the solution to the problems on Wall Street. Even more significant is the role that the lobbyists play in an issue like this also, and then that cronyism.

It's symptomatic of the greater problem that we see right now in Washington, and that is just that acceptance of the status quo, the politics as usual, the cronyism, that has been allowed to be accepted. We've got to put government and these regulatory agencies back on the side of the people.

MR. MCLAUGHLIN: Question: Is Palin successfully stealing the cronyism, "Washington is broken" platform from Barack and from Joe? I ask you.

MS. CROWLEY: She is the perfect messenger for this message. It's tailor-made for her. She's from Alaska. She's outside the Washington establishment. This is the main reason why John McCain chose her to begin with -- not because she's a woman, not because he was trying to attract the Hillary voters. It's for going after middle-class voters, white working-class voters, this message, because she hasn't been part of this message that Obama and Biden and, frankly, John McCain has been too. MS. CLIFT: The more we talk about serious economic issues, the more irrelevant Sarah Palin seems. She cannot see Wall Street from her front porch.



MS. CLIFT: She has not thought about --

MR. MCLAUGHLIN: You mean, as she can see Russia.

MR. BUCHANAN: She is --

MR. MCLAUGHLIN: Okay, hold on.

MS. CLIFT: She is breathtakingly hypocritical about cronyism when --


MR. MCLAUGHLIN: Notwithstanding that, I want to point out to you, Pat -- hold on -- the GOP is in bloom. New polling data says that all might not be lost for the GOP, the Republicans. The Pew Research poll of independent voters shows that both the Democratic and Republican Parties are equally favored in the public mind. The poll says that independents give Republicans a 50 percent favorable rating and the independents give the 49 percent rating.

Question: Has Sarah Palin struck again? Has she transformed the Republican image and the polling? I ask you, Pat. Exit question.

MR. BUCHANAN: Sarah Palin is the salvation -- (laughter) -- of the GOP, and maybe of this country.

MR. MCLAUGHLIN: Eleanor, is she responsible for this?

MS. CLIFT: The Palin phenomenon is fading. The Democrats will pick up at least four or five seats in the Senate and 15-20 seats in the House.

MS. CROWLEY: Sarah --

MR. MCLAUGHLIN: Has Palin moved this enormous see-saw? This (weight ?) is now up?

MS. CROWLEY: She was chosen to go after the bulk of those independent voters who like their guns and their religion as much as she does, yes. MR. ZUCKERMAN: Listen, she's a political phenomenon. She transformed the whole campaign for the presidency. You cannot dismiss that. Whatever you feel about her, she's been extraordinary. She changed it completely.


MS. CLIFT: It's fading. It's fading.

MR. MCLAUGHLIN: -- (sainted ?) Palin.

Issue Three: The Russians Are Coming.

Tensions have been high with Russia since the early August violence in Georgia. This past week, Russia and Venezuela conducted joint aerial operations in -- get this -- the Caribbean. Two Russian TU-160 bombers held week-long exercises with Chavez this past week. Russia also announced that they would be selling military equipment to Venezuela. Secretary of State Condoleezza Rice read the riot act to the Russians, pointing to a, quote-unquote, "worsening pattern of behavior."

SECRETARY OF STATE CONDOLEEZZA RICE: (From videotape.) I'm referring, among other things, to Russia's intimidation of its sovereign neighbors, its use of oil and gas as a political weapon, its unilateral suspension of the CFE treaty, its threat to target peaceful nations with nuclear weapons, its arms sales to states and groups that threaten international security, and its persecution, and worse, of Russian journalists and dissidents and others.

MR. MCLAUGHLIN: Question: Is the risk of war with Russia, nuclear war, greater now than it was during the Cold War? I ask you, Eleanor.

MS. CLIFT: No. The only role nuclear weapons have, really, is a deterrence. And I would hope that there are people with some sanity in the capitals of both worlds.

MR. MCLAUGHLIN: Do you think --

MS. CLIFT: But I think flirting with all of this provocative language is really unnecessary. I'm not saying it's going to lead to a hot war, but it certainly is going to complicate U.S. relations with Russia when we need them to fight terrorism, when we need them on the global climate front, when we need them because of their oil and gas. I mean, it's an unnecessary provocation.

MR. ZUCKERMAN: And we need them --

MS. CROWLEY: Eleanor, are you just as concerned, though, about the inflammatory language coming from the Russians? I mean, President Medvedev said about three weeks ago, "We will crush you," in very Khrushchev-like kind of language. So I think, to be fair, we ought to take a look at Russian motivations as well. Your question about is the risk of war --

MS. CLIFT: He hasn't taken off his shoe and pounded the table yet.

MS. CROWLEY: Well, that might be next. But your question about is the risk of war greater than it was during the Cold War -- no, we're not going to war with Russia. We're certainly not going to have a nuclear exchange with Russia. But what I see is an increasing attempt on the part of the Russians to wage proxy fights -- maybe not hot wars, but their support of Venezuela and their arms shipment to Iran this week makes this very serious.

MR. MCLAUGHLIN: On proxies, we used to operate with Russia through a series of proxies. We had Angola. We had Vietnam. Who else did we have?

MR. BUCHANAN: Afghanistan.

MR. MCLAUGHLIN: We had Afghanistan.

MR. BUCHANAN: Nicaragua.

MR. MCLAUGHLIN: We had Nicaragua. Now we don't have those. We don't have those to operate. We're having these direct challenges.

MR. BUCHANAN: What's going on --

MR. MCLAUGHLIN: Secondly, we've got NATO on their borders in a way that we have not had before. So on that basis alone, it would appear, not to alarm anybody, but as you compare this to the Cold War, that the proximity ratio is less -- is more --

MR. BUCHANAN: What is happening, John -- what is happening is the Russians are on their muscle now; there's no doubt about it. But they are responding. They're responding to us moving NATO up to their borders, maybe into Georgia and Ukraine.

MR. MCLAUGHLIN: Taking over Kosovo without letting them know about it --

MR. BUCHANAN: Exactly; tearing it away from them.

MR. MCLAUGHLIN: -- when Serbia is their practically stepchild.

MR. BUCHANAN: What this is is it's back and forth, and it's foolish. As Mort says --

MR. MCLAUGHLIN: Why are we sticking our finger in their eye? Did you hear Condoleezza Rice? MR. ZUCKERMAN: I agree. I agree.

MR. BUCHANAN: We've been doing it for 10 years, and I think we need a new administration. But the Russians are getting on their muscle. So are --

MR. MCLAUGHLIN: Is Rice interested in her personal legacy or is she doing it because she thinks there's some positive benefit for foreign policy?

MR. BUCHANAN: She can't make any change right now. John, look, the Russians are sending anti-aircraft missiles to Iran and to Venezuela because we sent them to Poland.

MR. MCLAUGHLIN: I want to hear what you think on this.

MR. ZUCKERMAN: We have no sense of priorities in our foreign policy. Why we are placing certain kinds of missiles in Czechoslovakia and Poland when we need Russian cooperation on Iran is beyond me. We're just antagonizing them. I'm not saying that the Russians are blameless; don't get me wrong. But we also have to calculate our own policy in order to accomplish our own goals. We aren't doing that.

MR. BUCHANAN: We need Russia and Russia needs us, and it's stupid what we're doing.

MR. MCLAUGHLIN: Okay, we've got a minute. Let's go to Afghanistan.

Across the globe, tensions are rising. Afghanistan -- a resurgent Taliban has strained U.S. and NATO forces. One hundred and twenty-two U.S. soldiers were killed so far in Afghanistan this year. Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, wants more U.S. brigades in Afghanistan, and he is pessimistic.

ADM. MIKE MULLEN (chairman, Joint Chiefs of Staff): (From videotape.) I'm not convinced we're winning it in Afghanistan.

MR. MCLAUGHLIN: Question: Is troop escalation in Afghanistan the answer? Let me tell you that Brzezinski says no; we'd be just replicating the failure of Russia. Force is not the way to do it.

Predictions. Pat.

MR. BUCHANAN: The decisive move by Bush, Bernanke and Paulson will raise Bush up to around 35 to 40 percent in the polls.


MS. CLIFT: Lame-duck session of Congress after the elections.

MR. MCLAUGHLIN: How long? MS. CLIFT: Two weeks. (Laughs.)

MR. MCLAUGHLIN: The pro-western government of Ukraine collapsed this week. Moscow will see to it that it's replaced by a Russian puppet government.

MR. ZUCKERMAN: If they don't approve the present equivalent of an RTC, we will have a major economic freeze and a credit breakdown in this country.


MR. ZUCKERMAN: This is the idea that the --

MR. BUCHANAN: Resolution Trust Corporation.

MR. ZUCKERMAN: -- federal government will buy these illiquid loans that pervade the entire financial system, most of them tied to real estate, more residential real estate.

MR. MCLAUGHLIN: I predict that history will tell us that the U.S. clandestinely okayed the invasion by Georgia of South Ossetia.

Don't forget, you can see the McLaughlin Group anywhere in the world at Bye-bye.