HARWOOD:YOU HAVE SUPPORTED THE FEDERAL INTERVENTION IN BEARSTEARNS SAYING IT WAS NECESSARY TO PREVENT SYSTEMIC FAILURE IN THE MARKET PLACE. BUT AS FAR AS INDIVIDUAL HOMEOWNERS GOES, YOU HAVE PROVIDED A PLAN TO HELP WRITE-DOWN SOME MORTGAGES AND HAVE A FEDERAL BACK STOCK THERE, BUT YOU'VE DEFINED IT NARROWLY. YOUR AIDS SAY PERHAPS AS FEW AS 200,000 HOMEOWNERS MIGHT BE AFFECTED.THERE ARE 2 MILLION HOMEOWNERS NOW FACING FORECLOSURE. IF THIS IS A VIRAL PROBLEM, AS YOU SAID, WHY ISN'T THAT SYSTEMIC RISK ENOUGH TO JUSTIFY A BROADER APPROACH TO THE PROBLEM THAN YOU'VE SUPPORTED SOFAR?

MCCAIN: LOOK, FIRST OF ALL, I THINK THAT CORPORATE GREED IN EXCESS AND CORPORATE COMPENSATION, AS IMENTIONED IN MY REMARKS, IS UNACCEPTABLE IN AMERICA. AND I'M NOT SURE IF CORPORATE AMERICA UNDERSTANDS HOW BAD THEIR REPUTATION IS TODAY BECAUSE OF IT.WHEN WE HAVE A MAJOR ORGANIZATION TURN DOWN A SHAREHOLDER, NON-BINDING RESOLUTION ON EXECUTIVE COMPENSATION, THERE'S SOMETHING BADLY SKEWED.

HARWOOD: DO YOU THINK SHAREHOLDERS, BYTHE WAY, SHOULD BE ABLE TO VOTE ON A SORT OF PAY PACKAGES OF CEOS?

MCCAIN: ABSOLUTELY. ABSOLUTELY.

HARWOOD: YOU'RE IN THE SAME PLACE AS OBAMA AND CLINTON ON THAT ISSUE?

MCCAIN: BUT I'VE BEEN THERE FOR A LONG TIME. I THINK THE POINT IS THAT SHAREHOLDERS OUGHT TO HAVE, OBVIOUSLY, MORE SAY.THAT'S THE EXCUSE AND RATIONALE FOR THE SYSTEM WE HAVE TODAY ANDI THINK THEY SHOULD BE THE ONES THAT PUNISH.BUT IN THE CASE OF THE OVERALL SITUATION, BEAR STEARNS, PROBABLY WOULD HAVE IF THEY'D COLLAPSED HAD A RIPPLE EFFECT THAT WOULD IN THE END HURT THOSE HOMEOWNERS BECAUSE OF THE DEVASTATING EFFECT IT WOULD HAVEON THE ECONOMY.THE KEY IS TRANSPARENCY, THE KEYIS KNOWLEDGE, THE KEY IS BETTER OVERSIGHT OF THESE INSTITUTIONS,THE KEY IS UNDERSTANDING A GLOBAL ECONOMY WHEN THE SUBPRIMELENDING CRISIS AFFECTS A TOWN IN NORWAY, WE'RE IN A VERY DIFFERENT WORLD THAN MOST OF US GREW UP IN. BUT I BELIEVE WHEN YOU'RE TALKING TO MY VIEW, IT'S 400,000 HOMEOWNERS, THIS IS GREAT BEGINNING.BUT YOU ALSO DON'T WANT TO REWARD PEOPLE WHO WERE PART OF THAT MISLEADING OF THE AMERICAN PEOPLE THAT BOUGHT HOMES ON PURE SPECULATORY REASONS AND LEFT THEM EMPTY IN THE BELIEF THAT THEY WOULD FLIP THEM A COUPLE YEARS LATER.I WANT TO HIT THE PEOPLE WHO ARE MOST DESERVING FIRST AND MOST EFFECTIVELY THAN IF THERE'S OTHER THINGS WE CAN DO. AND THERE ARE, WE PAST A STIMULUS PACKAGE, WE'VE TAKEN OTHER MEASURES, AS WELL.

HARWOOD: LET ME ASK YOU A COUPLE OF THINGS QUICKLY BECAUSEWE'RE SHORT ON TIME.DELTA AND NORTHWEST NOW LOOK LIKE THEY'RE GOING TO MERGE. THE AIRLINE INDUSTRY HAS BEEN IN DEEP TROUBLE. IS THAT THE RIGHT ANSWER? CONSOLIDATION FOR BOTH THE INDUSTRY AND FOR CONSUMERS?

MCCAIN: WE'VE ALSO SEEN FOUR OR FIVE AIRLINES GO UNDER, JUST AS YOU KNOW IN THE LAST COUPLE OF WEEKS.THE AIRLINE'S IN TROUBLE, PART OF THIS GOES BACK TO FUEL COST, THIS GOES BACK TO AN ABSOLUTE VITAL REQUIREMENT.WE BECOME INDEPENDENT OF OIL.THESE THINGS ARE NOT DISCONNECTED. I'D LOOK AT IT CAREFULLY, I'D THINK YOU'RE PROBABLY GOING TO SEE MORE CONSOLIDATIONS IN THE INDUSTRY.

HARWOOD: AND THAT'S OKAY WITH YOU?

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