Oct. 9, 2008 -- The following is an excerpted transcript of ABC News' Charles Gibson's interview Thursday with John McCain about the second presidential debate, the economy and other issues important to voters, for "World News With Charles Gibson" in Wisconsin.
GIBSON: Senator, we're in a global market meltdown, and the very firmament of our economy and what it's based on has had seismic shocks in recent days. And yet night before last, you guys were having a debate about spending and taxes and earmarks that you could have had three months ago. And that's frustrating to people.
MCCAIN: Well, I think that in my opening comments I made a very strong case that we are in a crisis of unprecedented proportions. And that's why I recommended strongly that we go out and have the Treasury buy up these bad mortgages, so, and arrange it as they did during the Depression.
That's exactly -- in fact, Sen. [Hillary] Clinton has recommended this. Buy up these mortgages. Let people have them in affordable payment levels. And put a floor on this continuing plummeting of housing -- of home prices. As long as that value continues down, I don't see a stabilization.
But then in answer to your question, you sort of go to, in all due respect, to where the questioner leads you. One thing that frustrates audiences a lot of times and viewers is you get asked a question and you give, you know, your own set, planned answer. So I thought I emphasized as much as I possibly could in every answer that I appreciate the depth of the crisis that we're in.
GIBSON: Let me talk about that plan. $300 billion. New money or part of the $700 billion?
MCCAIN: Part of the $700 billion, new money, if necessary. Look, in one day they wiped out $1.2 trillion when it dropped 700 points. And I'm not throwing this money around lightly. But if the housing values continue to go down, there's no floor. There's no turnaround here. We all know what was the catalyst for this catastrophe. And that was Fannie and Freddie.
We did cover that a bit during the debate, which I warned about and wrote [a] letter about and proposed legislation along with others to try and rein in Fannie and Freddie. And because of the corruption and cronyism in Washington, no one acted. And it's fascinating to me that the same people that are taking credit for the bailout, the Democrats, Chris Dodd, Barney Frank and others, were defending Fannie and Freddie and the corrupt practices they were doing. I'll tell you. Life's funny.
GIBSON: You used the word bailout.
MCCAIN: I've used the word bailout.
GIBSON: But it really is a rescue plan.
MCCAIN: It's got to be a rescue plan, yes. In fact, we really -- one of the reasons why there was so much resistance to it -- you know, our mail and phone calls were running heavily against it because it was a, quote, "bailout" for Wall Street. Well, if we can assure people that it's going to keep people in their homes, then I hope that that changes the attitude some.
GIBSON: Some of the reaction to your plan of $300 billion to buy up mortgages. People say, look, I've paid my mortgage. I didn't overspend. I didn't take a house that I couldn't afford. I'm paying my mortgage. Why are you going to help them and do nothing for me?
MCCAIN: Because if your neighbor's home value continues to decline, so is yours. Your life savings -- and I appreciate that you were able to make your payments and struggles that you had. But if your neighbor's home continues to plummet in value and sits empty, then it's going to affect your home as well. So we're doing this for you as well. And hopefully we reach a floor on the home values, and yours and your neighbor's homes can increase in value.
GIBSON: You're going to discount his mortgage? And I'm still going to have pay my 6 or 7 percent?
MCCAIN: Look, this is a crisis of unprecedented proportions. In many ways it's the same situation we faced in the Great Depression. That organization was set up at the end of the day because home values had began to go up. The taxpayers' dollars came ... small amount, small amount, paid for itself. Right now should we be bailing out all these institutions? Or should we be helping the homeowner in America? We may have to do both, but I'd like to put the homeowner first.
GIBSON: We've talked to a lot of folks this week as we've taken this bus around the battleground states. One woman said to me, look, if one of these guys could in a succinct, very simple manner explain to me how they're going to get us out of this economic mess, he'd win. It's still to be won, but it doesn't seem to me, she said, if either one has or can.
MCCAIN: Well, first of all, I want her to stay in her home, which so many millions of people now are facing the threat of losing. Second of all, I want her to be able to go to the gas station and fill up her gas tank without having it consume an ever-increasing amount of her fixed income. And third of all, we want to create jobs. And we can do that by creating jobs that get our economy going again and not raising taxes and by alternative energy sources such as nuclear power and all kinds of -- those kinds of ways of eliminating our dependence on foreign oil, we'll create millions of jobs. These are tough times.
GIBSON: Somebody else said to us I don't see a passion and I don't see the anger in either one of these guys. We've lost trillions of dollars from our pension plans, from our 401(k)s, from our stock accounts. And fear seems to pervade this country at the moment. Leaders need to counter that.
MCCAIN: Well, I've never been accused of a lack of passion. But the point is they also want firm, solid, measured, mature leadership. Franklin Delano Roosevelt didn't go on the radio and start yelling. He assured the American people. Right now the American people need seasoned and experienced leadership. That's what I offer.
GIBSON: Have we lost rationality in the economy? Pass the $700 billion rescue plan and the market goes down. The Fed promises to be the lender of first resort to businesses and to banks, the market tanks. We have a worldwide drop in the lending rates yesterday and credit markets stay frozen, again the market went down. Where's rationality in all this?
MCCAIN: Rationality is that to a certain degree, as is always the case, it has to do with confidence or lack of confidence and there's a psychological effect. But the underpinnings, the underpinnings where we have basically failed to save, we have allowed institutions such as Freddie and Fannie to basically mortgage our children's futures, where we've let spending get completely out of control and we're up to a $10 trillion debt for future generations of Americans. $500 billion we owe the Chinese.
We've got to, not only, reform the way we do business, but we also have to tell the American people, we've got to start saving. And we've got to start doing what our parents did. And that is not getting on our credit card sprees and not mortgaging our kids' futures. So we're going to have to have some rationality amongst the American people as well and appreciation that savings is also an important part of any family's future.
GIBSON: One of the women the other night asking questions said why should we trust either one of you guys with our money. It's a simple question, but I thought it was rather profound in that it expresses a basic lack of faith in any institution in this country.
MCCAIN: So Americans' faith and confidence is shaken. I think I saw a poll where 5 percent of the American people think that they are -- that the country's on the right track. They must be the short sellers. I haven't met anyone else. Look, the American people are -- I don't like to use the word fear because Americans by nature know we can overcome any challenge. But they're very badly shaken out there.
And Sen. [Barack] Obama wants to raise -- increase spending by $860 billion. He wants to increase the taxes on 50 percent of small business income. He's been all over the place on all of his tax proposals. I have the experience and the knowledge and the judgment to make the right decisions, including on reigning in the growth of government.
GIBSON: Does this almost monolithic focus on the economy in the news and in people's minds in recent weeks ...
MCCAIN: I totally understand it.
GIBSON: Hurt your campaign?
MCCAIN: I don't know, Charlie. I think by offering wise solutions and providing mature leadership that it'll redound in my behalf. Look, in my favor. But this is a tough campaign. I'm the underdog. I've always been the underdog from the beginning. I was the underdog in the primaries.
I can remember when you and I were in a debate and I was down at the end. And you were down at the end by precedence of how people thought you were standing. So we're going to be OK. And we're going to be fine.
GIBSON: But you were sort of humming along there in the polls for a while, and then this issue sort of pervaded everything. And it's not, it seems to have coincided with the drop.
MCCAIN: I'm not going to complain about the hand I'm dealt, my friend. We're coming up with solutions. We're trying to give the vision and leadership for the American people. And I'll accept their judgment.
GIBSON: Why then in recent days have you focused so in what you've had to say on Sen. Obama's character, talked about the fact that we don't know him, that he's come out of nowhere, that he's not an open book, etc.
MCCAIN: Well, I'm not sure that's character. What I think it is, is does he have the experience and the knowledge and judgment and has he made the right decisions and has he told -- been candid with the American people. I think that's important.
They certainly know me.
GIBSON: You don't think he's been thoroughly vetted, having gone through all the primaries and all the campaigning, running for president as long as you have? Two years?
MCCAIN: No, actually I don't. In fact, Sen. Clinton in their debates said that the American people didn't know enough about him, including his relationship with Mr. [William] Ayers. That's what she said. And I agree with that. He said he was a guy in the neighborhood. We know that's not true. He said -- he wrote down a piece of paper that he would take public financing for his presidential campaign if I would. He betrayed the trust of the American people there.
He looked in the camera twice during the debate with Sen. Clinton and said, "I will sit down and negotiate with John McCain before I decide to forgo public financing for my campaign." He never called me. He looked in the camera and told the American people something that was patently false. He told the American people about his relationship with Mr. Ayers, that he was a guy in the neighborhood.
He wasn't a guy in the neighborhood. He launched his political career in his living room, in Mr. Ayers' living room. And I don't care about two washed-up old terrorists that are unrepentant about trying to destroy America. But I do care, and Americans should care, about his relationship with him and whether he's being truthful and candid about it.
GIBSON: Do you think his character or lack of candor disqualifies him to be president of the United States?
MCCAIN: I'll leave that up to the American people. But I have every right to insist that he be candid and truthful with the American people. And he needs to be asked about it, and he needs to be forthcoming.
GIBSON: You didn't raise that, this argument, this argument, or line of argument, at the debate the other night. And I asked Sen. Obama about that yesterday. He said yeah, I'm surprised that John didn't say that to my face.
MCCAIN: Again, two things I've never been accused of lacking. And one is passion, and the other is courage. I mean, I can accept a lot of the other criticisms. It didn't come up in the flow of the conversation. But it did come up, and I pointed out that he asked for $3 million for an overhead projector at a planetarium in his hometown of Chicago.
And coincidentally the guy who was the chairman of that organization pledged to raise $200,000 for his campaign. His record is replete of requests for pork barrel, unnecessary, wasteful spending. And I'll let the American people make a judgment there.
GIBSON: Do you think the relationship with Ayers is a critical issue in this campaign or factor in this campaign?
MCCAIN: I think it's a factor about Sen. Obama's candor and truthfulness with the American people. That's what I think it's about. As I say, I don't care about Mr. Ayers who on Sept. 11, 2001 said he wished he'd have bombed more. I don't care about that. I care about him being truthful about his relationship with him. And Americans will care.
GIBSON: And you're comfortable that this should be a focus in the last days of the campaign?
MCCAIN: I think it's something that needs to be examined. Sen. Clinton said it should be examined during their primary and never was.
GIBSON: Senator, good talking to you.
MCCAIN: Thanks, Charlie.
GIBSON: Thank you.
MCCAIN: Good to be with you, as always.