There were several interesting exchanges in Thursday’s first hour between Douglas Holtz-Eakin and Austan Goolsbee, but this one stood out. Holtz-Eakin said that the Treasury plan to take an ownership stake in banks is “very disturbing,” and added: “It’s not the way things should be done in the United States.”

Here’s the transcription of that part of the interview, followed by Goolsbee’s response.

DOUGLAS HOLTZ-EAKIN: The administration went to the Congress with a blank check proposal for $700 billion dollars and talked exclusively about buying securities from Wall Street firms — evidently the policy that Obama wants to defend. There was discussion by the Congress of putting in an insurance plan, of putting in loan opportunities. There was never a word of public discussion about putting taxpayer money into financial firms as equity investments and de facto nationalizing them. I think that’s not the way an administration should conduct itself. That’s at odds with the notion that we have an informed democracy with all of its leadership agreeing on the policies—

TOM ASHBROOK: It’s a Republican administration proposing it.

HOLTZ-EAKIN: It doesn’t matter if it’s a Republican or Democratic administration. It’s not the way things should be done in the United States, and that’s very disturbing if that’s the route they intend to take.

A few minutes later Tom asked Goolsbee for his reaction:

TOM ASHBROOK: What about Hank Paulson’s describing the possibility that the government might actually step in and invest in banks — it’s been described as nationalizing banks. You heard Douglas Holtz-Eakin very skeptical on that front. What about you and the Obama campaign? Good idea or bad?

AUSTAN GOOLSBEE: Well, look, that’s clearly outlined in his authority in the bill. I was actually quite shocked — Douglas Holtz-Eakin wasn’t skeptical, he was outright opposed to it. He appears not to remember that in the bill that was passed, the government is getting warrants in the banks. That the people that they’re buying securities from, the government gets an upside. John McCain himself said that the government ought to get an upside. And this direct infusion of capital into the banks, uh, the government takes an upside. It is, I might point out, almost exactly what the government did with AIG, they gave them money and took equity, and John McCain supported that action. So I was really shocked to hear Doug Holtz-Eakin say he thought that in principle it’s a terrible idea and one that we can’t do. Because what’s clear is that the banks are over-leveraged and under-capitalized. And we are at the precipice of a very, very dangerous situation where you could have banks failing all over the place. If we get to a situation like that, the government must consider all possible options to prevent us from going into a very deep recession.

You can listen to the full show here.