CHRIS WALLACE, ANCHOR: Joining us now, the GOP's top man in Washington, Senate Republican Leader Mitch McConnell. And, Senator, welcome back to "Fox News Sunday."
SENATE REPUBLICAN LEADER MITCH MCCONNELL, R-KY.: Glad to be with you.
WALLACE: Let's start with the tough immigration law that the Republican governor of Arizona signed on Friday, which requires police officers to check the status of anyone that they reasonably suspect could be an illegal immigrant. Do you support the law? Do you think it's constitutional? What about the claim it will lead to racial profiling?
MCCONNELL: Well, I think the real question is whether we're going to take up immigration here in Washington. And there are two things missing that were there in '07. In '07, we had a rather low unemployment rate, and we had a president really committed to taking up the issue. Two of the cabinet secretaries were up during the debate for six weeks.
So I think the question for us is, are we going to go forward up here? And it strikes me that with all the border security problems we have down there, they're actually worse than they were three years ago, and with 10 percent unemployment, it's not a great time to take this issue up in Washington.
WALLACE: Are you prepared to comment on the Arizona bill?
MCCONNELL: I haven't studied it. I know it's quite controversial. But studying a state law is not something I normally do. And I just haven't looked at it in detail yet.
WALLACE: Don't Republicans -- and some would say that this is the whole point of this new Democratic zeal in Congress for pushing immigration reform -- don't Republicans run the risk of alienating a large and growing block of voters, Hispanics?
MCCONNELL: Look, I think it's an important issue. We do -- we have an enormous number of people who are in this country illegally. The important question, what to do with them? Guest worker issue. But of course, now we have a very high unemployment rate. I just don't think this is the right time to take up this issue with the border security problems, the drug wars going on across the border, 10 percent unemployment. It just strikes me that our time would be better spent at the federal level on other issues.
WALLACE: All right. Let's turn to an issue that you are dealing with, and that is financial regulation. Senate Democratic Leader Harry Reid has called for a vote sometime Monday afternoon/Monday evening to cut off a filibuster by Republicans to bring the financial regulations bill to the floor of the Senate.
WALLACE: Is there a bipartisan compromise? If not, do you have the 41 senators on board to sustain the filibuster?
MCCONNELL: Well, we don't have a bipartisan compromise yet. But I think there is a good chance we're going to get it. What I'd like to see is an opportunity to prevent the Democrats from doing from the financial services industry what they just did to the healthcare of this country. We saw the CMS report on Friday. We know that everything --
WALLACE: Would you say those are the health and human services actuaries?
MCCONNELL: Actuaries. Looking at what would be the impact of this bill. And he virtually confirmed everything that Senate Republicans were saying about the healthcare bill. It's not going curb costs. A whole lot of budget gimmicks, and on and on. We want to make sure that they don't have the same kind of approach on financial services that they did on health care. And ironically, Chris, my view is very similar to that bastion of conservatism and tool of Wall Street, the "Washington Post" editorial page, which said this morning that this bill needs to be improved -- $50 billion bail- out fund needs to come out.
We need a system in there under which creditors can expect that they're going to be treated fairly, somewhat similar to the bankruptcy laws. And we need to have capital requirements. None of that is currently in the bill that the majority leader would try to have us take up on Monday which came out of the committee on a strictly party line vote. That is not the best place to start.
WALLACE: All right, I want to press the question I asked you before, though. Do you have the 41 Republican votes to sustain the filibuster tomorrow?
MCCONNELL: It's my expectation that we will not go forward with this partisan bill tomorrow. That will stimulate the kind of continued discussion we have to get it right along the lines that the "Washington Post" is recommending this morning and along the lines I think is the best way to go as well.
WALLACE: Well, let's talk a little about that. The big argument as you framed is it whether the Democratic bill will prevent more bail-outs as the Democrats claim or whether it will enable more bail- outs as you claim. Senator, isn't the $50 billion fund that you criticize -- and I must say, that was part of the "Washington Post" story, too. Isn't that intended to liquidate failing firms, not to prop them up?
MCCONNELL: Well on that issue as to whether or not it's a good idea to raise the money and stick that fund in there, the secretary of the Treasury, the president's own secretary of Treasury agrees with me. The "Washington Post," as I just indicated, agrees with me. It's better not to prefund, no matter how you fund it, whether it's a tax on banks or whatever it is, a fund that creates an expectation that it will be used. In addition to that --
WALLACE: What would it be used for? It would be used to liquidate, not to prop them up.
MCCONNELL: It would be used in the same way that we use the TARP funds back in 2008. And, you know, that is a bad idea. What we need to do is make it virtually, if not impossible, to be too big to fail. The way you do that is enhanced capital requirements.
WALLACE: Enhanced capital requirements is in the current bill.
MCCONNELL: Not in the way that we would do it. And second, don't suggest to creditors that if you are a friend of the government, you're going to be treated better. We saw that in the General Motors deal. The government treated the unions better than it did the bondholders. We need to have creditors understand that they're likely to be treated very, very similarly to the way they would be in bankruptcy law in this country. That kind of stability, I think, is a better place to start in the Senate than this partisan Dodd bill that came out of committee without a single Republican vote.
WALLACE: And you are saying that until you get satisfaction on these issues, and it sounds like there are several issues, not just the $50 billion fund.
WALLACE: You're saying that until then you believe you have a solid Republican vote to keep the bill from getting to the Senate floor.
MCCONNELL: Yes, it's not ready yet. I mean, the Democrats over the weekend are arguing themselves over the derivatives portion of it, very complicated subject. The Democrats are not even in agreement on that. Chris, this is not a situation where anybody I know in the Senate wants no bill to pass. But it is important to pass a good bill.
WALLACE: You just heard the two chairs of the president's debt commission. Are there any circumstances under which you could accept as part of a grand bargain, a grand deal, tax increase?
MCCONNELL: Let me just put it this way. I appointed my members and I assume that this is a serious effort -- a serious effort to do something about arguably our biggest problem, which is the mountain of unfunded liabilities we have coming our way, that everybody understands.
And so I don't think it's a good idea to appoint members to a commission and then start telling them what they can and can't do. I will give you my own opinion. My own opinion is we don't have this problem in the country because we tax too little. It's because we spend too much. But I didn't sit down with the three members of this commission that I appointed and tell them what to do. They're going to meet in good faith, come up with a recommendation. And whether or not it ultimately passes frankly will depend upon what it looks like.
WALLACE: All right. But I'm asking not only as an individual senator, forget the question of the commission, but as an individual senator, and coincidentally, the top Republican in the U.S. Senate, could you accept a compromise which had serious spending cuts but also had tax increase?
MCCONNELL: If I start telling the commission --
WALLACE: I'm asking you personally.
MCCONNELL: I have told you that me personally, I don't think we have a problem because we tax too little. I think we have a problem because we spend too much.
WALLACE: But aren't we headed for a deadlock? Because anything that's going to be acceptable to both sides obviously is going to have to include, to get the Democrats on board, spending cuts and tax increases?
MCCONNELL: Well, I think we'll have to wait and see, won't we? They are going to report in December. We'll take a look at the report. My understanding is, the majority leader and the speaker are committed to taking the measure up in December. My support will depend entirely on what it looks like, what it recommends.
WALLACE: You were part of a bipartisan group that went to the White House this week, met with the president about his upcoming Supreme Court nomination. You can see pictures here of you in the Oval Office with the president and other congressional leaders, Senate leaders.
Did you come away with any sense of whether the president is looking for someone who can be easily confirmed, or conversely whether he's looking for someone who is more liberal and therefore would stir up more of a confirmation battle?
MCCONNELL: No, he didn't tip his hand. Frankly, if I had been in his shoes, I wouldn't either. The only thing I said to the president on this issue is that it ought to be an orderly process, not a rush to judgment. I mean, this is a lifetime appointment, a very significant position. And we're going to treat it fairly and go through process of looking at the record of the individual.
WALLACE: You have obviously seen as we all have of the list of half dozen to 10 nominees. Are there some people on there that you just hate or conversely people on there that you could support?
MCCONNELL: I wouldn't want to mention anyone. I know there would be no chance that person would be appointed. I don't want to eliminate somebody's possibility of being on the Supreme Court by suggesting that I might find them a worthy selection.
WALLACE: You think it would be a badge of dishonor?
MCCONNELL: Yeah, I think it would not do them any good, put it that way.
WALLACE: All right, back in 2005 when Democrats were in the minority and they were filibustering judicial, Bush judicial picks for the bench, you said this -- and let's put it up on the screen. "Any president's judicial nominee should receive careful consideration, but after that debate, they deserve a simple up-or-down vote."
Question, are you willing to say right now that you will not filibuster, you may vote against, but you will not filibuster President Obama's nominee?
MCCONNELL: Well, it's interesting, in the meeting this week, Senator Leahy, Senator Sessions, Senator Reid, president and vice president were there. There were only two of us that have never filibusters a Supreme Court nominee, Senator Sessions and myself.
The president and vice president and Leahy and Reid had all filibustered Justice Alito. We had a big debate about that around the time that you just pointed out on the screen. And unfortunately, the no filibuster ever on judges position lost. That was my position and the position of Senate Republicans but Democrats established that that is a possibility.
It's highly unlikely, however, unless the nominee is an extraordinary individual outside the mainstream with really bizarre views, but now that the Democrats have established that as a precedent, against my better judgment, that is the precedent of the Senate and remains a possibility.
WALLACE: But you are putting it out as a pretty remote and pretty extraordinary circumstance.
MCCONNELL: Yeah, I never filibustered a Supreme Court nominee. The vice president and Senator Reid have. So far I've never done that. It would take an unusual nominee to justify that.
WALLACE: Finally, I want to ask you about Florida politics, which everyone seems to be getting swept into these days. Several top Republicans, including Mitt Romney and Dick Cheney this week endorsed the former House Speaker Marco Rubio in the battle for the Senate GOP primary in Florida. You have endorsed Governor Crist. Are you taking back your endorsement?
MCCONNELL: Well that was over a year ago and a lot has happened since then. Governor Crist has suggested he might be running as an Independent. My advice to him would be to compete as a Republican. He has been a Republican all of his life and to remain within the party. I hope he will do that.
WALLACE: Are you taking back your endorsement?
MCCONNELL: Not today.
WALLACE: But he has to decide by next Friday, right?
MCCONNELL: I think if the governor were to decide to run as an Independent, he's not going to have any Republican support.
WALLACE: And if he decided to run as a Republican, would you still support him?
MCCONNELL: A year ago, I said that I would support the governor. At the time he seemed to want our support to get into the race and we were not sure we were even going to be competitive in Florida.
WALLACE: But are you troubled by what he has done?
MCCONNELL: I would be troubled if the governor decided to run as an Independent. I think that would be a serious problem. And he would certainly not have my support and not have the support of any other Republicans that I know.
WALLACE: Senator McConnell, thank you for coming in. It's always a pleasure to talk and sometimes even to spar with you.
MCCONNELL: Thank you, Chris.