TRANSCRIPT: Sen John McCain

STEPHANOPOULOS: Several of your colleagues look at this bill and say it could put the taxpayers on the hook for up to $25 billion for Fannie Mae.

They look at the government stepping in to help Bear Stearns and they say, this is socialized capitalism. You know, what we have is that the private companies get to make all the profits. When they get in trouble, the government steps in.

Is that right?

MCCAIN: No, it's not right. But we reached such a situation that, if these institutions failed, the impact on millions of innocent Americans could be very severe.

In the case of Fannie and Freddie, we should stop their lobbying activities. We should eliminate the pay and bonuses that these people rake in...

STEPHANOPOULOS: George Will has an idea on that.

MCCAIN: ... the most...

STEPHANOPOULOS: He says that when some places like Freddie Mae (ph) or Fannie Mae or Bear Stearns get the government guarantee, that the executives that work there should get a government salary.

MCCAIN: Sure. That's exactly right. And we could go out and ask people -- the smartest people in America, maybe somebody like Jack Welch or John Chambers or Meg Whitman, people like that -- and say, come and take over and do it for $1 a year. They'd be willing to do that.

But the other thing is, the shareholders should not be the first ones to be paid. There should be new preferred stock issued. And those people would be, and the government, paid off first, since the government is on the hook.

STEPHANOPOULOS: And should the government get some stock, so that if Fannie Mae does recover, the taxpayers should benefit?

MCCAIN: Absolutely. Absolutely, they should, in my view. And we've got to send the signal that, over time, that these kinds of institutions have not helped the American homeowner. They've basically helped enrich a lot of people that otherwise shouldn't have been.

STEPHANOPOULOS: A majority of Americans think you're going to come in. They look at your tax plans and say you're going to be just like President Bush on the economy.

What would you do right now -- spending aside -- that would be different from what President Bush is doing?

MCCAIN: Well, I would give every family in America double their exemption for -- on the child tax and children's tax, a dependent tax break, from $3,500 to $7,000.

I would declare that we will scrub every agency of government and eliminate those that are not necessary.

I will veto every single pork barrel bill that comes across my desk, and make them famous.

I will promise that we will not only keep tax cuts low, but we will have some additional incentives for American investment and growth of jobs.

I will embark on an immediate, an immediate effort to eliminate our dependence on foreign oil -- nuclear power, offshore drilling, wind, tide, solar -- and stop this drain of $700 billion a year from the American economy. This administration -- for 30 years, Congress and the administrations have not done anything on this energy crisis. Now, it's hurting low-income Americans the most.

There are many steps that can be taken absolutely, including the gas tax holiday. Everybody -- everybody...

STEPHANOPOULOS: Not a single economist in the country said it'd work.

MCCAIN: Yes. And there's no economist in the country that knows very well the low-income American who drives the furthest, in the oldest automobile, that sometimes can't even afford to go to work.

STEPHANOPOULOS: But they all say that that's...

MCCAIN: And they haven't met...

STEPHANOPOULOS: ... not who's (ph) going to get the benefit. The oil companies, the gas companies are going to absorb...

MCCAIN: You know, they..

STEPHANOPOULOS: ... any reduction.

MCCAIN: ... they say that. But one, it didn't happen before, and two, we wouldn't let it happen. We wouldn't let it -- Americans wouldn't let them absorb that.

STEPHANOPOULOS: How would you prevent that?

MCCAIN: We would make them shamed into it. We, of course, know how to -- American public opinion. And we would penalize them, if necessary. But they wouldn't. They would pass it on.

STEPHANOPOULOS: Let me ask you about...

MCCAIN: But let me just finally say, Americans need trust and confidence in their government.

The most important thing I would do, the most important of all, is what I have done all the years I've been in the Congress. I'd reach across the aisle to the Democrats, and I'd say, "Let's go work together."

MCCAIN: I've worked with -- it's not a fact that I would do something new. I've worked with Joe Lieberman, Ted Kennedy, Russ Feingold, Byron Dorgan -- you go down the list -- Carl Levin, Fritz Hollings.

Look down the list of the bipartisan legislation and action that I've done together. I could do that much, much more effectively as president of the United States.

STEPHANOPOULOS: Social Security. You're a longtime supporter of the private accounts, as President Bush called for them.

MCCAIN: I am a supporter of sitting down together and putting everything on the table and coming up with an answer. So, there is nothing I would take off the table. There was nothing I would demand.

I think that's the way that Ronald Reagan and Tip O'Neill did it. And that's what we have to do again.

STEPHANOPOULOS: In the past you said there was essentially -- and you told the "Wall Street Journal"...

MCCAIN: No, I have said and will say, I will say that everything has to be on the table, if we're going to reach a bipartisan agreement. I've been in bipartisan negotiations before. I know how you reach a conclusion. We all have to sit down together with everything on the table.

STEPHANOPOULOS: So, that means payroll tax increases are on the table, as well?

MCCAIN: There is nothing that's off the table. I have my positions, and I'll articulate them. But nothing's off the table.

I don't want tax increases. Of course I'd like to have young Americans have some of their money put into an account with their name on it. But that doesn't mean that anything is off the table...