As the conversations and accusations continue to swirl around the proposed bailout legislation, Dennis Prager sought clarity from Senator Joe Lieberman. He spoke to Dennis from the Senate cloak room.

Prager: Let’s begin with this: Were you surprised? The public is being told a deal was made and then torpedoed by House Republicans. Is that the fact?

Lieberman: This is not the fact. There was not a deal. There was an agreement, let’s say, among some members of the Senate Banking Committee and the Democrats in the House side of the House Financial Services Committee. They went out and announced it. Frankly, I think they announced it prematurely, because the normal course is to take those agreements back to the four caucuses. So, there never was an agreement. It was clear the House Republicans are very much against the Paulson plan. I was in the Senate Democratic caucus with Paulson the other night—one of my rare appearances these days, Dennis, at Senate Democratic…

Prager: I was thinking that.

Lieberman: And there was a lot of really emotional challenging of Paulson. [It was the same among] Senate Republicans. So no deal, and then Senator McCain came back to try to put one together. I think he’s in a position now as the titular leader of the Republican Party to have a special ability to bring people together. And his goal is to get an agreement that saves the country from an economic disaster—but to make sure the taxpayers’ money is protected in it, and I think that’s the direction in which we’re heading.

Prager: What was the major Senate Democratic objection to the Paulson plan?

Lieberman: Now the difference: To some extent the things people focus on in the different caucuses are different, but the overall concerns are not. There’s real concern about one making sure that if it does end up being $700 billion of taxpayers’ money that the taxpayers are protected as best we can—and that we basically try to get an ownership interest in any fiscal entity that we put money into. That was not there in the original Paulson plan. That’s a major concern of House Republicans as well, and also Senate Democrats obviously want to go after Wall Street and cap compensations—so does John McCain—of the CEOs on Wall Street. Of course, they would like to introduce a tax increase into this bill, but that will never go.

Prager: Alright, so what is the big divide? Are there one, two, three issues? What’s the big divide?

Lieberman: You know it’s an interesting question. I think there’s a conceptual agreement that there has to be protection for the taxpayers’ money, there has to be a cap on executive compensation, there has to be a sort of oversight—none of which was in the original Paulson plan. The House members are very concerned. They want to—they would prefer—that the government have the ability to try to just insure some of these banks instead of actually buying assets, because that could be done more cheaply, and [they want] to have Wall Street pay for it. Secondly, Secretary Paulson seems to be skeptical about whether that would work. I think that compromise may be—make that one of the options that he has to consider. But the good news here is that we’re now down to four people negotiating—one for Senate Democrats and Republicans, one for House Republicans and Democrats.

Prager: And who are they?

Lieberman: It’s Chris Dodd, senator from Connecticut for Senate Democrats, Judd Gregg, senator from New Hampshire for Senate Republicans. On the House side it’s Barney Frank from Massachusetts for Democrats and Roy Blunt from Missouri for Republicans. I feel quite optimistic that these four can reach an agreement, hopefully by the end of the day that we can take to the floor of both chambers tomorrow. I think everybody understands that we have got to get something done before the markets open on Monday. But frankly, it’s got to be something sensible because it makes no sense to rush to do something that doesn’t get the job done and is unfair to the taxpayers. And I think that’s the whole McCain approach. That’s why he flew back. That’s why I think he’s been constructive. That’s why I think you are seeing some coming together of the parties.

Prager: So Senator McCain’s coming back to Washington was helpful?

Lieberman: Yes, I mean the Democrats are trying to put out the message that there was a total agreement and McCain came back and blew it up. That’s just not right, not true. There was no total agreement. The House Republicans particularly were always not part of the proposed agreement and a lot of Republicans and Democrats in both Houses were not part of it. I think McCain went back and forth yesterday afternoon, this morning between Senate and House. He talked to a lot of people, was on the phone with the administration, the White House, Paulson and I think he’s a big part of the reason why it’s down to four strong negotiators that are roomed together. That’s always the best way to get something done. And then they come out to the caucuses. So he felt that there was enough progress made that he could take off for Oxford, Mississippi. He’ll be at the debate tonight, and then he will fly back right afterward to be here tomorrow to see if we can close the deal.

Prager: Did Senator Obama play any analogous role on the Democratic side?

Lieberman: Not that I can see. And that’s an interesting point. I wasn’t in the White House meeting yesterday. Some of the Democrats criticized John McCain for not making a long speech saying that Senator Obama had, but John’s here not to make speeches. It was a very contentious meeting and he basically said for the sake of the country and the people we serve we got to get together and reach a bipartisan agreement. And then he went to work to try to make that happen.

Prager: I have to tell you that was my read before you came on. It was all conjecture and, ironically, I came to that conclusion based on Harry Reid’s comments.

Lieberman: It’s really been laughable. The truth is, when McCain came back he did it sincerely. He did something risky because staying on the campaign trail you are not accountable for what happens here. He came back to try to do something right for the country. But, if it doesn’t happen, then he’s accountable for it.

Prager: That’s right.

Lieberman: I think he is going to help make it happen this weekend in a way that will protect taxpayers. So to say that he caused a problem—I think Obama and McCain are the now leaders of their parties by virtue of their nomination.

Prager: That’s right. Well said.

Lieberman: This is a big problem. And for them not to be here would have been a mistake.