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Glenn Beck

U.S. Headed for Depression?; McCain in Iraq while Economy Crumbles; Children`s Miracle Network Aids Sick Children

Aired March 17, 2008 - 19:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

(BEGIN VIDEOTAPE)
GLENN BECK, HOST (voice-over): Tonight, blood all over Wall Street as a major investment bank collapses. Who`s next in the crisis of confidence?

Also, the dollar continues its record-breaking sell-off. Just how dangerous is this slide for America?

And what is John McCain even thinking? Why is he in Iraq while the American economy is in a meltdown? I`ll tell you why this can only hurt his bid for the White House.

All this and more tonight.

(END VIDEOTAPE)

BECK: I mean, what better place to talk about the economy going to hell in a hand-basket than by the pool? Hello, America. I`m down in Florida today, where I hosted a benefit for the Children`s Miracle Network and I`ll be here for a couple of days. More on that in just a bit. The weather here is absolutely perfect, but there is a storm brewing up in Wall Street.

The collapse of Bear Stearns, major investment bank, highlights just how much trouble our economy is in. Very few on television can actually look you in the eye and say, "I told you so," and that`s because they don`t tell you very much. They are afraid to be honest with you. They are afraid to be wrong. Or quite honestly, they`re afraid to look stupid. And I`ve made a cottage industry out of all of those things. So what have I got to lose?

Here`s "The Point" tonight. For over a year I`ve been telling you the economy is in big trouble and, unless all of the cards are played exactly right, we are bracing for the next Great Depression. Here`s how I got there.

When it comes to, you know, what I`ve been telling you about the economy over the last 12 months, I wish I were wrong, but I haven`t been.

(BEGIN VIDEO CLIP)

BECK: Twenty-six percent of all new home loans this year are interest-only loans. That means we`re buying houses we can`t afford. Who in their right mind thinks that`s a good idea?

This banking crisis is a lot worse than anybody is telling us, because everybody has a vested interest in making sure that it doesn`t go bad.

If we keep spending as recklessly as our government does, this good economy not going to be around much longer.

(END VIDEO CLIP)

BECK: That was two years ago. I mean, even I can`t be wrong all of the time, right?

By the way, the one guy who is starting to finally see the light on this is Alan Greenspan. He`s the former Fed chairman who now says the current meltdown could be the worst this country has faced since World War II. However, our current treasury secretary, Henry Paulson, has a rosier view.

(BEGIN VIDEO CLIP)

HENRY PAULSON, TREASURY SECRETARY: We have capital markets that are the envy of the world. That they`re competitive. That they`re efficient. That they -- that we move quickly when we need to address issues. And we have financial institutions that are strong financial institutions, recognized as such around the world, and will be strong intuitions for a long time to come.

And it`s the job of regulators to come together during times of stress and address situations that help us protect our capital markets.

(END VIDEO CLIP)

BECK: Hmm. No. I think he`s got that one -- oh, yes. Look. We know the mortgage crisis is having a ripple effect across the financial spectrum. It now looks like the Federal Reserve open market committee is set to cut interest rates again tomorrow. Does that mean we should all breathe a sigh of relief? No. Wall Street is going to go up just like it did last week. It`s not even close.

A cut in interest rates essentially means that they literally print more money. That`s a bad thing.

According to "The Wall Street Journal," "The more dollars that they pump in can`t fix what is fundamentally a problem of bank solvency." That`s a quote. So tonight, here`s what you need to know, America.

There is one area of the financial market that is doing well. It`s short sellers of the bank stocks. These guys are essentially betting that banks will continue to lose money, that they may make some cash in the short term. Well, that`s great. But when average people like you see Wall Street losing confidence in our banks, they freak out. They withdraw the money, and that could cause even more banks to collapse. It is a vicious cycle where, in the end, we all lose.

Bob O`Brien is the editor of "Barron`s" online, and Peter Schiff is the author of "Crash Proof: How to Profit from the Coming Economic Collapse."

Bob, let me start with you. Forget about all this talk about Wall Street and everything else. The average person is having trouble with milk. They`re having a problem buying gas. They`re having a problem making their house payment. Seventy percent of our engine of our economy is run on us spending money. How do we pull ourself out of this hole if people don`t have money to spend?

BOB O`BRIEN, EDITOR, "BARRON`S" ONLINE: Well, Glenn, that`s a -- that`s a very thorny question that we`re trying to grapple with here. I mean, basically, everything that we`re trying to try and bail out the financial services business is something -- it`s one of these, you know, Main Street versus Wall Street initiatives. Everything you do to try and help Wall Street ends up rebounding and hurting Main Street.

I think that`s going to continue. I think the only message you can send to consumers out there is that they better be prepared for this to take a long time before it remedies itself.

BECK: What does that mean -- what does that mean to you exactly? How does the average person -- remember, average person -- that`s, you know, struggling to make the payments in gas, what do they do to prepare?

O`BRIEN: Well, there`s not much they can do at this juncture, I`m afraid. I mean, you`re looking at record levels of, you know, things like oil, record levels for dairy products. Even basic staples of life are all going to be -- are all going to be more expensive going forward. And I think the only message you always get from regulators and government officials is, folks, you`re going to have to ride this one out. There`s no simple fix here.

BECK: Yes. Peter, you and I talked. We`ve talked about this for quite some time, and a lot of people have made fun of you for a long time, being such a pessimist and calling this one damn near on the money, so to speak, up to this point.

I said on the air -- I don`t know, three, four months ago -- buy coats for your kids. Buy shoes for your kids a couple of sizes up, because you`re going to need them, and they`re going to cost you more money down the road. And everybody was making fun of me. Sounds kind of like what Bob was just saying.

PETER SCHIFF, AUTHOR, "CRASH PROOF": Of course. There`s a downside. All these bail-outs cost money, because the Fed pays for them with inflation. You know, it`s crazy. You`ve got Ben Bernanke or Paulson on television. Every time I turn on the TV, there`s Paulson reassuring the American public that the underlying economy is sound.

You know, it`s like you go to your doctor. He tells you you`re in excellent health, "But I just want to perform open heart surgery, just in case." The Fed would not be doing this if the underlying economy were sound. It`s because it`s unsound if that they`re acting in desperation, but they`re actually making the problems worse, not better.

BECK: So, Bob, you think that we would be facing, if it hadn`t been for the Fed, what they`ve done already, we`d be facing something that was worse than the 1930s right now?

O`BRIEN: Regardless of whether the Fed has acted or not, we`re in a circumstance that compares with the Great Depression. Whether you`re talking about weakness in the labor markets or the distress that we`re seeing in the housing market, the comparisons with the 1930`s depression is very easy to make.

I think the -- you know, the only difference is on the margins where you see improved productivity results in a slightly better quality of living.

BECK: We`re running out of bullets. The Fed is going to make another rate cut tomorrow. They did two massive things last week. And it doesn`t really matter. They`re just pumping more money into it. When do they run out of bullets?

O`BRIEN: The market seems to suspecting that we`re going to see a 100-basis-point cut in the federal funds rate tomorrow. That will take you down to 2 percent. I mean, you know, do you want to enter a circumstance like the one that took place in Japan for most of the 1990s, where effectively real interest rates were in the negative? I don`t think the Fed wants to do that, they`re getting pretty close to having -- having emptied the -- emptied the holster here.

SCHIFF: But it`s not a sense of running out of bullets. They`d been shooting blanks the whole time.

The problem isn`t that Americans aren`t spending enough money. The problem is, we spent too much money. These cures is designed to try to get us to spend more.

You know, Glenn, when you mentioned at the top of the hit that our economy is the engines of consumer spending, it`s not. The engine of economic growth is consumers not spending. It`s savings. That`s what drives the economy. That`s why our economy is phony.

We`re just like Bear Stearns. Bear Stearns went under because they had too much debt. Well, our entire country has too much debt, and we can`t pay it back, just like Bear Stearns.

BECK: Peter, I`m going to bring this up with Mary Matalin here in a few minutes, because we`re talking about John McCain. But where are the real conservatives? Where are the people that say, all of this stuff that the Fed is doing is socialism? We are socializing and nationalizing.

SCHIFF: Exactly. There was one, you know, Ron Paul, but they drummed him out of the Republican Party. I mean, nobody would pay him any attention. He`s the only guy that has the courage to speak the truth. Look at what he says on the Senate Banking Committee when he talking to Ben Bernanke and when he talked to Alan Greenspan all these years. He`s talked all this. He`s warned about all this. But everybody has ignored him and others like him.

I mean, I get marginalized in the mainstream financial world, just like Ron Paul has been marginalized in the political world.

BECK: Right. And Bob, how fast do we see a sign of hope that something is working? Or the other direction? How fast do we fall to the bottom?

O`BRIEN: Well, how quickly can we -- how quickly can we go further -- can we go lower here, whether in the equities markets or the dollar? I mean, I don`t think there`s -- I don`t think there`s a floor in place. Traditionally, these kinds of cycles tend to be long-running cycles.

I will hesitate, however, to say that when the financial sector starts to rebound, that typically puts a place -- puts in place a bottom to the market. So, if nothing bad happens...

BECK: How will we know that?

O`BRIEN: When the bad news stops -- you`re only going to know it in hindsight. When the bad news stops -- if Lehman Brothers doesn`t go out of business tomorrow, if another investment bank doesn`t cut -- doesn`t need to go hat in hand to the Fed, then perhaps, perhaps we can start to build something of a base here. But this market has an enormous amount of base (ph).

SCHIFF: Don`t even look for the bottom. We`re years and years away. There`s a lot of pain to come. This thing is just starting. Our whole economy was a house of cards, and it is going to collapse.

O`BRIEN: Typically the housing cycle...

BECK: Thanks for that. No, no, no. Hang on. Guys, guys, I`ve got o leave it there. I`m an alcoholic. I`d put stuff in that here in a second.

Coming up, as the economy falls apart, the Republican nominee for president of the United States of America is overseas. Why John McCain just doesn`t get it.

(COMMERCIAL BREAK)

BECK: Well, the Fed has put Bear Stearns on the clearance rack, and JPMorgan swoops in to buy it. Actually, you swooped in to buy it, whether you like it or not. What the collapse of a major investment bank, one that actually survived the Great Depression, means to your savings in just a bit.

First, there`s a story out this weekend that Senator John McCain, the presumptive Republican presidential nominee, arrived in Iraq yesterday morning. He`s scheduled with meet with American ambassador to Iraq and military commander General David Petraeus. Officially, the trip is billed as an official congressional delegation but really, I mean, come on. Let`s be honest. It`s McCain showing off. I mean, look, I`m good with the military. We get it, John. We really do.

The -- the thing is, Senator McCain, if I may be so bold, on behalf of the American people, we know you`re an old soldier. You`re big on defense. We get it. It`s honestly the only song I like to hear from you. But I already know all the words to this one.

I`m glad you have a strong defense in foreign policy position, but have you noticed we`ve got big problems right here at home right now? Our economy is literally falling apart, when major financial institutions like Bear Stearns start collapsing, you need to multitask a little bit. Remember: if the economy tanks, we can`t afford to buy any more bullets. It`s exactly what happened to Russia when we put them out of business.

Whoever wins the White House in November needs to prioritize with laser-like intensity on fixing the economy while winning the war. If Senator John McCain can`t see the American people need sound leadership on all of these issues, a perfect storm that is facing us, not just defense, then maybe he has no business sitting behind the big desk after all.

Mary Matalin is with us now. She`s a Republican strategist and former White House advisor.

Mary, I -- for the life of me, when I saw John McCain after what happened on Friday, and I know you have to line these things up way in advance, when I saw him in Iraq, I thought, this guy just doesn`t get it.

MARY MATALIN, REPUBLICAN STRATEGIST: No. Well, best-selling-est author of all-time, always great to be with you.

BECK: Thank you.

MATALIN: And as you well you know, you just ended -- you just ended your lovely piece there with exactly what is the case. It`s not an either/or: the economy or national security. It is both.

And to the extent that we are going to be -- well, we know we have to discuss how to and when to redeploy. We`re going to pull down out of Iraq this year. Or next. And how we do it and when we do it is going to be a big issue in the -- and an economic issue, as well. You`re exactly right. They`re inextricably intertwined in the presidential thing. But yes, everybody has got to get out there with an economic plan.

Also, I`d point out today that Mrs. Clinton, Senator Clinton, who I think is going to beat Senator Obama, is giving a speech on Iraq. So it`s not an either/or, but it`s all hands on deck as we scrape through this credit crunch and this housing collapse.

BECK: Mary, I`ve looked. I`ve looked. I`ve asked our producers to look. You know, can you find anything that John McCain has said about the economy this weekend. I haven`t found it yet. I mean, we`re looking at some real, real problems.

The -- the statement that he made before he became the presumptive nominee was, "I`m not real good on the economy, but I did read Alan Greenspan`s book." I mean, for the love of Pete, you`ve got to be a little better than that and a little more timely.

MATALIN: Yes. Glenn, you`re right about that, but a good answer for people who think like you and I do, who are growth -- we`re into growth programs, not just deficit cutting and earmark reducing. And also the Congress botched up that again, with no earmark reform.

But he last week -- and there was a big front page piece in "The Wall Street Journal," talked about his growth plan. It`s essentially Giuliani`s paying corporate tax cut rate, et cetera, but you`re right. He`s going to have to clean up from that unfortuitous remark that he made. And he`s going to have to use Jack Kemp and Phil Graham and a lot of conservative economic types.

So, yes, it`s a problematic. You`re right. Timing is -- timing is important in these things. But he`s -- I think this crisis is going to go on long enough that there will be time to get in the story.

BECK: Well, here`s the problem, Mary. We are -- we are -- I think we`re running out of time here. We`ve got massive socialism happening right before our eyes. We are -- the Fed is nationalizing all the bad debt. And where are the conservatives standing up and saying, "I`m not for socialism for poor people. I`m not for socialism for rich people. Stop nationalizing this debt"?

MATALIN: This is a -- you know why? I think -- I don`t -- I don`t even presume to have any expertise on this. But to the extent that they do not know -- no economist that I have talked to understands the depth of this housing -- how did this loan crisis, relative to housing, go. And they don`t know if you -- it`s not just foreclosures and the pain of all of that and the dislocation.

It`s we could tank the whole housing market, industry, which is not, obviously, bad for the economy. But we`ve never seen like anything like this. I`m not in any way suggesting a depression. But they just don`t know. And when they don`t know, they have to take what measures they can to at least stop the confidence crisis. It is not...

BECK: OK.

MATALIN: It doesn`t go to -- doesn`t go to comport with the principles, but it`s not anything that we`ve ever seen. And it`s making everybody wiggy.

BECK: Right. I`ve only got about 30 seconds. I`ve got to play this clip for you for you. And you tell me: has Barack Obama, in a 90-minute interview this weekend, solved this problem? Here`s his preacher.

(BEGIN VIDEO CLIP)

REV. JEREMIAH WRIGHT, PASTOR, TRINITY UNITED CHURCH OF CHRIST: This is a three-strike law, and they want us to sing "God bless America." No, no, no. Not God bless America. God damn America. That`s in the Bible. We`re killing innocent people. God damn America.

(END VIDEO CLIP)

MATALIN: No.

BECK: Is -- is this Main Street, America? How does this guy -- how does Barack Obama say, "Oh, I -- I disagree with some of his views?" Nobody should agree with those views or sit in that pew.

MATALIN: His additional problem is that this is in conjunction with Michelle Obama saying the only time she`s been proud of America has been recently.

There`s this -- he has not explained it well. It`s going to be difficult. You can`t say, "I just didn`t hear it" when you were -- had baptized your children there, you`ve been going for 20 years. What you just missed every sermon that was like that?

BECK: Yes.

MATALIN: It`s hard to listen to that and think it is a unique event. Very big problem for the senator.

BECK: Mary, always good to see you. Thank you so much.

MATALIN: Best-selling news author of all time.

BECK: All right.

The -- the incredible work of a charity that is very close to my heart is why I`m here in Florida. You know, you thought it was that pesky delegate thing, I don`t really care. One of the founders of the Children`s Miracle Network joins me in just a second.

And it`s a miracle our economy hasn`t totally collapsed, but it sure seems to be bet getting there. The latest on the collapse of Bear Stearns and what it actually means to you, coming up.

(COMMERCIAL BREAK)

BECK: If you know anything about me personally, you know that I have a daughter of special needs. She has cerebral palsy. She had several strokes at birth. And by the grace of God, she was born at Phoenix Children`s Hospital.

If you don`t have a child with special needs, you don`t know. When you need a children`s hospital, you need one. Well, that`s why I`m actually here in Florida. I`m helping out the Children`s Miracle Network that helps out children`s hospitals all across the country and now the -- now the world.

Jimmy Osmond is the baby of the Osmond family and on the board of trustees for the Children`s Miracle Network.

How are you doing, Jimmy?

JIMMY OSMOND, BOARD OF TRUSTEES, CHILDREN`S MIRACLE NETWORK: I`m good. I`m a big baby, though, these days, you see.

BECK: I know you are. I have to tell you, I stood -- I stood backstage. I watched you and your brothers and your sister perform. Not only you guys still have it, I mean, it was just a fantastic performance, but I stood with your older brother Verle...

OSMOND: Right.

BECK: ... and I had never heard the story about why you guys are a singing family. Can you quickly share that family?

OSMOND: You bet. Well, you know, my mom and dad were very private, especially about our involvement with Children`s Miracle Network, but you know, my two older brothers were born deaf, and they never really performed with us. And as a matter of fact, the doctors told them not to have any more kids. Boy, am I glad they didn`t listen, being the youngest.

BECK: Yes.

OSMOND: But my mom started a foundation back then to help children -- hearing-impaired children, and it`s better known today as the Children`s Miracle Network. And it helps all elements, all sicknesses, all diseases for all races. And it`s amazing what it`s -- what it`s accomplished, thanks to good people like yourself. We really appreciate your involvement.

BECK: Oh, no. It was an honor to be there. It really was. And that was -- it was so cool to just stand there and watch your older brother. They were watching the retrospective. And we were behind the screen, where everything was reversed. And he looked at the family, and he had such pride out of all of the brothers and, you know, your whole family out there performing.

OSMOND: Yes.

BECK: And I said, "Quite an amazing family."

And he said, "My parents were darn near perfect."

OSMOND: It`s true.

BECK: And it was...

OSMOND: Yes.

BECK: It was just -- it was just so great. It really was.

OSMOND: My brother`s a beautiful man. He really is.

BECK: Yes. What is the -- what is the plan now with the family? How deeply involved -- because you are the -- still on the board of trustees or governors.

OSMOND: Sure.

BECK: But it seems like almost -- maybe I`ve got the wrong impression, that you guys were passing the torch to the next generation. Is that true?

OSMOND: Well, actually, it began with the Osmond Foundation, and we`re still very much involved with the organization. It`s -- it`s the largest of its kind. When you see these little balloons and all the retailers like Wal-mart or whatever, that`s the organization.

But it`s really about, like you said earlier, it is about children`s hospitals.

BECK: Yes.

OSMOND: And unless you`re touched by a situation just like your daughter, you know, my daughter was also in a children`s hospital. And I looked up and I saw the little miracle balloon, and I go, "Thanks, Mom, for having the foresight to put this organization together."

BECK: Yes.

OSMOND: But, you know, we`re very much involved, very much. But it`s not about the Osmonds. We got it started.

BECK: Yes, I know that.

OSMOND: But it`s rolling forward with, you know, an amazing -- now it`s going into the UK and Ireland and Australia this year, as well.

BECK: Yes.

America, please. When you see the little balloon, please donate. It is -- you don`t know until you have a child who needs a children`s hospital.

Thanks, Jimmy. Appreciate it. We`ll see you again.

OSMOND: Thank you so much.

BECK: The Fed -- you bet.

The Fed rides to the rescue with Bear Stearns as it collapses, but is a bail-out really the way to go? We still haven`t learned a lesson that we should have learned in the Great Depression. I`ll explain in tonight`s "Real Story," coming up next.

(COMMERCIAL BREAK)

BECK: I have to tell you, I have one of the greatest jobs on the planet. I`m down in Florida today for a charity event. And I spent a full hour with Jeff Foxworthy. It`s an interview that he said one was of the more unique interviews he`s done.

You`ll enjoy it, this Friday, 7:00 and 9:00 p.m. Eastern, on "The Glenn Beck Program."

But first, welcome to "The Real Story." And tonight it`s pretty simple.

We have just witnessed this country`s first major run on a bank in decades. And now it has claimed its first victim.

Last Friday, Bear Stearns, the fifth largest security firm in the world, simply ran out of cash. The only thing that stood between them and total collapse was a Great Depression-era procedure that the Federal Reserve Bank of New York used to bail them out.

Now, despite all the BS spin that you`re hearing everywhere else, nobody had a risk in this deal besides you, the taxpayer. We`re now on the hook for every single bad dollar. If no buyer came forward and Bear Stearns` collateral turned out to be worthless, which isn`t exactly a crazy thought, then all of their billions in losses would have effectively been shifted over to our government and then shifted to you.

Can someone please explain to me how this is any different from flat- out nationization like the U.K. did to Northern Rock? Well, last night we all found out how critical last week`s situation really was.

Bear Stearns, a firm with a stellar reputation around the world, a firm with 14,000 employees, a firm that had survived the Great Depression, went bankrupt. They agreed to sell out to JPMorgan Chase for $236 million.

Now, that is a price, to put that into perspective, is about the height of some Powerball jackpots. In fact, Bear Stearns` Manhattan skyscraper alone is worth a billion dollars. So JPMorgan is effectively saying that their actual business is worth less than nothing.

Now, what most people don`t understand about our financial system right now is how it is so interconnected. I think the best way do describe it is like it`s a fragile spider web, a web that can completely become undone faster than anyone thinks.

For example, consider how last week went for Bear Stearns. It was Monday that they opened trading at around $70 a share. That was nearly $100 less than a year ago, giving them a market value around $8.3 billion.

Late that night, their CEO came out and said, hey, I just want everybody to know we`re not in any trouble. He said, "There`s absolutely no truth to the rumors of liquidity problems that circulated today in the market. Bear Stearns` balance sheet, liquidity, and capital remain strong."

OK? Not much room to misinterpret that.

The very next day, the Fed made an historic decision to offer its banks over $200 billion in new capital. There you go. Lots of money there.

All the time they said it was just to help with liquidity. But now I think we know better. The Fed likely already knew about Bear Stearns and the program was designed specifically for them and situations like them possibly on our horizon.

Of course the stock market didn`t care. It had its biggest one-day gain in over five years last week, because, hey, who doesn`t love free government money?

But for the next two days, the rumors about Bear Stearns kept swirling around, and by Friday those rumors had become reality. The CEO issued another statement, this time saying, "... amidst this market chatter, our liquidity position in the last 24 hours has significantly deteriorated."

Well, that turned out to be an enormous understatement. Their liquidity was gone. They didn`t have a dime to their name. They`re gone.

Anyone who doesn`t believe that a real financial meltdown could ever happen here, because, oh, America is too big, America can`t fail, you should think long and hard about that. Over $8 billion in equity vanished in under one week all because of rumors that created a run that ended in a ruin. If it can happen at Bear Stearns, it can happen to anyone at any time.

Sherry Cooper once served as an economist at the Fed. She`s now the chief economist at BMO Capital Markets. John Tamny is the editor of "Real Clear Markets." And Bill Fleckenstein is the president of Fleckenstein Capital and author of "Greenspan`s Bubbles: The Age of Ignorance at the Federal Reserve."

Sherry, let me start with you. We had a conversation on my radio program today where you said the Fed is actually studying the Great Depression. It`s a lot worse, or it must be a lot worse than anybody is actually stating right now because they`re planning on still doing yet more.

Right or wrong?

SHERRY COOPER, BMO CAPITAL MARKETS: Well, it is worse than anyone had expected it to be. That`s for certain.

It wasn`t that long ago when Bernanke suggested that there would be little or no contagion from the subprime and housing meltdown. Remember, though, that Bernanke is a Great Depression buff. He`s always studied the Great Depression. So that isn`t anything new.

A new research report posted on the Federal Reserve`s Web site does look at the historical events during the Great Depression and how many of the banks that went under could have been saved. So I have no doubt that the Fed is concerned. They will remain aggressive and very, very timely in their actions.

BECK: John, I`m not a -- look, I`m not an economist, but I`m a thinker. I mean, I saw this one coming. I don`t know why the Fed and everybody else -- I think they`re all lying to us, quite honestly.

But if you come in and you start bailing everybody out, everybody looks at the new deal as what saved us in the Great Depression. It`s actually what elongated the Great Depression. It lasted longer here than it did in the rest of the world.

Right or wrong?

JOHN TAMNY, EDITOR, REALCLEARMARKETS.COM: That`s absolutely right. The Fed and the federal government getting involved trying to save companies is just going to slow down the necessary recovery that always occurs.

When companies go under their assets are liquidated. They`re put into the hands of people who can get more value out of them, and the economy starts to grow. What`s happening right now is the Fed and the federal government are just merely elongating what is a slowdown.

BECK: OK.

Now, Sherry, everything was fine 10 days ago. You know, that`s what everybody was saying -- oh, we have no problem. Don`t worry. We`ve got plenty of everything. We`re all great. It`s all honky-dory.

When do we stop? We`re like heroin addicts when it comes to absorbing debt. At what point do we say, OK, well, we can`t do anymore?

COOPER: Well, I don`t think it`s quite fair to say 10 days ago everything was great, because over the course of the period, at least since July, if not since February of `07, we have seen a general decline in the value of not just homes, but financial assets in general, and especially financial service company shares. In addition, the Fed did let Bear Stearns go under.

In fact, the folks at Bear Stearns, 30 percent of the stock owned by the employees, are madder than hell because they feel that they, indeed, were -- were a real pawn in all of this. That they`ve been allowed to go under as a, you know, lesson to everybody else.

So I don`t think it`s quite fair to say that everyone says everything is terrific and now all of a sudden it isn`t. Things are rough, very rough.

BECK: You know, Bill -- Bill, you have Greenspan today -- or yesterday -- coming out in "The Financial Times" saying that, hey, it looks like this could be the worst thing since World War II. For the love of Pete, nobody has been saying that. I haven`t been able to get anybody to say that.

Now all of a sudden they`re facing up to the facts that a rodeo clown like me could figure out, and I think that Greenspan is part of the cause of this thing. He`s -- he started with the tech bubble, then 9/11, and now the housing bubble. And they keep doing the same thing, trying to bail us out, and it gets worse and worse and worse.

WILLIAM FLECKENSTEIN, PRESIDENT, FLECKENSTEIN CAPITAL: Well, as you may have guessed by the title of my book, I agree with your line of thinking. The problem -- and Sherry made a point about Bernanke studying the Great Depression, and the upshot of what Bernanke seems to think is, well, gee, had the Fed just pulled the right levers, we wouldn`t have had the Great Depression.

That`s an oversimplification. But what the Fed has missed, Greenspan particularly, and Bernanke now, is that the reason the problems occurred -- a lot of the problems occurred in the depression was because of the bubble that came before.

BECK: Right.

FLECKENSTEIN: The reason we have problems in America today are a consequence of the real estate bubble and the credit bubble that went with it. While it was under way, there was a lot of people, myself and plenty others included, who knew it was a housing bubble and knew it was preordained we would have a disaster afterwards.

The Fed was completely clueless, and they did nothing to try to stop it. In fact, Greenspan tried to make the case which I cover in the book that housing couldn`t be a bubble. And so, the Fed is a huge part of the problem we have.

That`s not to say that they shouldn`t try to keep things from getting worse by making -- you know, helping out in the Bear Stearns situation. I don`t object to that. But the problem is it`s got to stop. There`s got to be a conversation about how to keep this from happening ever again, and they never do that.

BECK: John -- you can`t do that in capitalism. I don`t know why all these economists think that you can save everybody and make everybody, you know, sunshine and lollipops all the time. Sometimes there are crashes.

John, let me go to you. The Fed is coming out tomorrow with yet another rate cut. Fantastic. More money in to the market.

You don`t just magically, you know, make money appear. You print more. It is going to cause more problems with the dollar. You can`t keep printing money.

TAMNY: Yes. I think there`s a couple things that need to be brought up.

First of all, inflation problems always lead to recession. We had inflation throughout the `70s and we had several recessions.

The other thing I think people need to remember is to relax. I mean, compared to the market correction of 2000 and 2001, the housing correction is minuscule by comparison.

The important thing, though, about 2000 and 2001 is we allowed companies to fail, and the result was that the recession was very shallow and quick. With the Fed and the federal government trying to soften the blow of a very minor by comparison housing correction, they`re just going to extend whatever slowdown they think exists. So I think people need to calm down.

BECK: Bill, you said -- because I have had several people say you should buy right now. You should buy housing, you should buy the market, because it`s a best thing to do. You disagree with that.

FLECKENSTEIN: Yes, because I disagree with John. One of the reasons why the recovery after the stock bubble was as mild as it turned out to be was because of the housing bubble.

The housing bubble allowed people to take money out of their homes as an ATM. If you look at the GDP statistics, mortgage equity extraction, there was almost no growth. And almost 40 percent of the jobs related in that recovery were housing-related.

So now I think that what`s happened in housing is just a start. This is liable to be way worse, and you`ve got bad debts in two locations, the consumer and the lending institutions.

I agree with John about the moral hazard of trying to fix this, but this is going to be far worse. And anyone who thinks it`s time to buy stocks now does not understand the problem.

BECK: Good. Thanks.

Sherry, John, William, thanks.

That`s "The Real Story" tonight. If you`d like to read more about it or you`ve got a real story of your own you`d like us to talk about, please go to glennbeck.com. Click on the TV button.

Now, coming up next, one of the best commercial authors out there on the market today, the author of "The Maximum Ride" series, James Patterson, will be here next.

(COMMERCIAL BREAK)

BECK: There is nothing better than losing yourself in a good book. For me, unfortunately, that usually means diving in to a 500-or-600-page book on economic or nuclear disaster, which is lots of -- sometimes, though, I need to take a break, and actually the last couple of days I picked up a brand new thriller written by a guy who has sold -- I don`t know, I think it`s like 150 million books worldwide, 12 million books sold in North America alone. Just a few more I think than what my book sold.

His latest was released today. His name is James Patterson. The book is called "The Final Warning," a "Maximum Ride" novel.

James, how are you, sir?

JAMES PATTERSON, AUTHOR: Terrific. It`s nice to be on this side rather than watching your show on the other side of my television.

BECK: Yes. OK. Well, good to have you on.

But I have to tell you, I`m -- as we talked on the radio today, I`m so bummed that the book went into global warming...

PATTERSON: Well, you shouldn`t be bummed because this is the thing for kids to talk about.

(CROSSTALK)

PATTERSON: You have daughters. It`s a 14-year-old girl.

BECK: Yes, I do.

PATTERSON: And she`s got her own point of view. I can`t -- you know, just like you can`t control your daughters, I can`t control the way this girl thinks. And I`m actually happy that, you know, she goes out there and tries to seek the truth a little bit.

BECK: No, I love your attitude. I really do, because she is -- your characters -- the way you`ve talked about them this morning and just now, she`s real to you.

PATTERSON: Oh, she is. Yes. She`s got a mind of her own.

And, you know, she shouldn`t think like a 60-year-old guy. She should have her own point of view. And it would be -- I think it would be a little goofy if she thought the way I did.

BECK: Yes. Well, it might be actually a little spooky and, you know -- but the -- the idea of half bird people is really fascinating.

You have -- in a way -- and I don`t know. My daughters have read the whole series. This is the first one that I`ve read. I read it this weekend, and it`s very good. But the idea of these genetic mutants is almost antigovernment and anti-spooky kind of scientists. You know what I mean?

PATTERSON: Well, they`re definitely -- they definitely have problems with the government and some big business, too. They were raised in a lab. They escaped.

They -- they have retractable wings, which is really cool, so they can walk around and then flap out their wings when they need them, which is I think why it`s going to the movies. We`ve got (INAUDIBLE) who did "Spider- man" and "Iron Man," which is coming out, and he`s making "Maximum Ride." So that will be very exciting for me.

BECK: Wait a minute. Wait a minute. Is it this one that`s going to the movie?

PATTERSON: Actually, I have another one that just sold to movies last week, so it`s been a busy, busy movie week.

BECK: OK. OK. I was going to say, because if this one is going to the movie, now I know -- now I know why it has global warming in it, because it`s...

PATTERSON: Oh, Hollywood?

BECK: I could make...

PATTERSON: No. You know, I have a 10-year-old...

BECK: I could make anything. I could have dancing pop tarts singing about global warming and they would film it.

PATTERSON: I don`t think it will be -- I don`t think it will be this book. It won`t be this book. It`s going to be one of the earlier books that they`re going to make.

BECK: You are...

PATTERSON: But I see your point. I see your point.

BECK: ... so unbelievably -- you are so unbelievably prolific. When do you sleep?

PATTERSON: I don`t sleep, actually. I write in my sleep now. It`s something I`ve developed over the years.

Well, you know, this morning we were on at 7:00 and I`ve been writing since 5:00. We were on at 9:00, and I`ve been writing since 5:00.

BECK: Do you think things are changing for the better or for the worst? It`s cool to see that kids -- you know, the "Harry Potter" and books like "Maximum Ride..."

PATTERSON: You know, it varies from day to day.

BECK: No, no, no. Like, your book, you`ve got parents reading these books with the kids. Parents can enjoy the book and the kids can read the book.

PATTERSON: Yes. That`s what I`m...

BECK: Is it gaining or...

PATTERSON: Well, you know, I think the best way to get kids reading - - and I`m convinced -- and if people are out there going, "My kid won`t read, my kid won`t read," give them books that they`re going to love.

Give them a "Maximum Ride," because they will like it. And you will like it, too. I mean, if you like "Spider-man," you like movies like that, you will like this. And my belief is that the best way to get kids reading is give them books they`ll love.

BECK: James, appreciate it. Enjoyed your book. Thank you so much. We`ll talk again.

PATTERSON: Thank you. Bye-bye.

BECK: Up next, a sneak peek of the interview I did with actor/comedian Jeff Foxworthy. You don`t want to miss it.

Stick around. It`s next.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

(BEGIN VIDEO CLIP)

JEFF FOXWORTHY, COMEDIAN: Now, I know some people will say, well, you know, sexually it`s more exciting when you`re single. I don`t know about that.

You ever tried to have sex with two little kids in the same house? My wife and I put our kids to bed, we`re running down the hall pulling off clothes like we`re hitting the beach at Normandy.

"Go, baby! Go! Go! Go, baby!"

"Daddy?"

No! They got me. "Start without me!"

(END VIDEO CLIP)

BECK: You know what? That`s horrible. Oh, my wife`s going to kill me for this -- baby monitors. Do you have baby monitors?

FOXWORTHY: Oh, yes.

BECK: Oh, yes.

FOXWORTHY: You know what?

BECK: My wife won`t turn them off for anything, or during anything. You know what I mean? So it`s like, OK, this is wrecking the mood for me, honey.

FOXWORTHY: Yes. This is not -- and you`ve got to be real sure that you put the right end in the right bedroom, because, like, when our girls were older, we didn`t hear our oldest daughter cry for three months. And her first words were, "Oh, yeah, baby, just like that."

BECK: You`re married...

FOXWORTHY: Twenty-three years.

BECK: Twenty-three years -- 23 years. Secret to that?

FOXWORTHY: You`ve got to talk to each other all the time. I wake up talking to her. I go to bed talking to her.

BECK: Does she ever -- because, you know, you do -- because I talk about my wife on the air all the time and, you know -- and she`s always going after it. And she`s cool. She`s great with it and everything. I do get hit in the arm a lot from her.

FOXWORTHY: Yes.

BECK: You know? I`ll be joking or something and she smacks me in the arm.

FOXWORTHY: You know when I get -- it`s funny, because she never has - - my wife`s name is Gregg. That`s really her name. Gregg -- G-R-E-G-G, she`s a twin. Two girls, Gregg and Glen (ph). But she never has a chance to defend herself, so I`m just up there talking about her.

BECK: I`m not going to ask any questions.

FOXWORTHY: Yes, she really is a girl.

BECK: No -- whatever. Hey...

FOXWORTHY: And so -- but then we`re like in the airport one day and these people come up and they look at her and they go, "Are you the one with the cold butt?" And she is like, "Quit talking about my butt on television."

So yes. She doesn`t think it`s quite as funny.

BECK: You know, I think every woman has a cold butt.

FOXWORTHY: They do.

BECK: They do.

FOXWORTHY: I don`t know why.

BECK: You know what? I found the greatest thing.

FOXWORTHY: And they get in the bed and they want to put it on you to warm it up.

BECK: Yes.

I wouldn`t mind that. Of course...

FOXWORTHY: I`ll send her over next time we`re in town.

BECK: No, no. I don`t necessarily need anything from Gregg.

But somebody sent me split sheets. Have you ever seen this?

FOXWORTHY: No.

BECK: The best. Half of it flannel sheets, the other half cotton.

FOXWORTHY: Oh my god.

BECK: You know what? I brought them home and my wife went, "This is fantastic, except it should have an electric blanket on my side."

FOXWORTHY: Yes. Oh my gosh...

BECK: Goodness. It`s like they`re bloodless.

FOXWORTHY: They are bloodless. They have to lay on a rock out in the sunshine just to get their body temperature built up.

(END VIDEOTAPE)

BECK: You can see my entire interview with comedian Jeff Foxworthy this Friday night, 7:00 Eastern. It`s an hour you don`t want to miss.

END