updated 9/24/2008 12:07:55 PM ET 2008-09-24T16:07:55

Guest: Barney Frank

DAVID SHUSTER, GUEST HOST (voice over):  Which of these stories will you be talking about tomorrow?

The bailout battle.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA, (D-IL) PRESIDENTIAL CANDIDATE:  This is not one of those circumstances where the president can come out and simply say, you do it my way or nothing‘s going to happen.

(END VIDEO CLIP)

SHUSTER:  Senator Obama makes it clear the people who have run this economy for eight years don‘t get to dictate terms on how to fix their own mess.  And both Obama and McCain say they‘re on the side of the taxpayers.

(BEGIN VIDEO CLIP)

OBAMA:  What the American people and taxpayers likely expect is that there‘s going to be accountability, that this is not a welfare program for corporate CEOs.

SEN. JOHN MCCAIN, (R-AZ) PRESIDENTIAL CANDIDATE:  No Wall Street executive should profit from taxpayers dollars.

(END VIDEO CLIP)

SHUSTER:  Meantime, back on the Hill, the Bush administration did the hurry-up-and-give us-what-we-want routine.

(BEGIN VIDEO CLIP)

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN:  So I urge you to act as soon as possible.

(END VIDEO CLIP)

SHUSTER:  But in this crisis, a bipartisan call to slow down.

(BEGIN VIDEO CLIP)

SEN. CHRIS DODD, (D) CONNECTICUT:  I understand speed is important, but I‘m far more interested in whether or not we get this right.  There is no second act to this.

SEN. RICHARD SHELBY, ® ALABAMA:  The Treasury‘s plan has little for those outside of the financial industry.  It is aimed at rescuing the same financial institutions that created this crisis.

(END VIDEO CLIP)

SHUSTER:  The politics of the bailout from the campaign trail to Capitol Hill with “Newsweek‘s” Howard Fineman.

And, will the Democrats blink again and give the Bush White House a blank check?  Our special guest is Democratic Representative Barney Frank.

McCain versus the media.

(BEGIN VIDEO CLIP)

UNIDENTIFIED REPORTER:  Has your bus become the “No Talk Express”?

(END VIDEO CLIP)

SHUSTER:  Hey, what do you know?  A few hours later, McCain held a news conference.  But the clamp down on reporters is still just as tight when it comes to Governor Palin.  As she embarks on her excellent U.N.  adventure meeting world leaders, there are no questions, no way, no how.  Just, say, cheese.

And, John McCain‘s lost his head, a flustered rookie not suited for the presidency, a Democrat on message?  No, try conservative George Will adding his voice to those on the right who have had enough of McCain/Palin.

All that and Matt Lauer‘s interview with Barack Obama: Now on

COUNTDOWN.

(on camera):  Good evening, everyone.  I‘m David Shuster.  Keith Olbermann has the night off.  This is Tuesday, September the 23rd, 42 days until the 2008 presidential election.

If the proposed bailout of the banking industry were a country, it would be the 21st biggest country in the world.  If it were a state it would be equal to three Ohios.  If it were a conflict, it would pay for three wars in Iraq so far.

In our fifth story on the COUNTDOWN: If you were spending $700 billion on something, or $700 billion on this something, wouldn‘t you demand some answers about what exactly you were buying?

President Bush today used his speech at the U.N. to call for urgent passage of the financial bailout plan, what would be the biggest government bailout since the Depression.  Meanwhile, his Treasury secretary and the chairman of the Fed were facing tough questions about that plan on Capitol Hill.

Why so many questions?  Because, so far, the Bush administration has offered few details about how the bailout would work.

At a press conference, the Democratic nominee for president, Senator Obama said that a blank check would not be acceptable.

(BEGIN VIDEO CLIP)

OBAMA:  This is not one of those circumstances where the president can come out and simply say, you do it my way or nothing‘s going to happen.  You know, the president has had oversight over this economy for the last eight years.  We now find ourselves in an enormous mess.

We should be working in a bipartisan fashion to figure out how to get us out of this mess.  But what the American people an taxpayers likely expect is that there‘s going to be accountability, that this is not a welfare program for corporate CEOs.

I‘m prepared to work as hard and as long with them as possible to get it right.  But what I‘m not willing to do is to put taxpayers in a position where they are writing a blank check and could end up being on the hook for enormous amounts of money with no assurance that it‘s actually going to solve the problem.

(END VIDEO CLIP)

SHUSTER:  So, how would lawmakers solve their problems with the proposal?  Among other things, taxpayers should get an equity stake in the financial firms they bail out, bankruptcy judges should be allowed to lower mortgages for distressed homeowners, and the Treasury Department should be subjected to independent oversight.

In his opening statement, Secretary Paulson claimed that he left oversight out of his original proposal merely to be polite.

(BEGIN VIDEO CLIP)

HENRY PAULSON, TREASURY SECRETARY:  We gave you a simple, three-page legislative outline and I thought it would have been presumptuous for us on that outline to come up with an oversight mechanism, that‘s the role of Congress, that‘s something we‘re going to work on together.  We need oversight, we need protection, we need transparency, I want it, we all want it.

(END VIDEO CLIP)

SHUSTER:  Actually, Secretary Paulson did presume to add oversight to section eight of his outline would said, quote, “Decisions by the secretary pursuant to the authority of this act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”

As for the sticking points to an agreement, he‘s against changes to address those, too.

(BEGIN VIDEO CLIP)

PAULSON:  I just believe very strongly if you impose these kinds of conditions, if you impose any kind of punitive conditions, this program won‘t work and we‘ll all lose.

(END VIDEO CLIP)

SHUSTER:  As COUNTDOWN reported last night, over the weekend, foreign banks successfully lobbied to be included in the American bailout.  Secretary Paulson stated that that would benefit you.

(BEGIN VIDEO CLIP)

PAULSON:  This is all about the American taxpayer, that‘s all we care about.  So any business, any banking operation in the United States that is doing business here and dealing with the American public is important.  They‘re all important.

(END VIDEO CLIP)

SHUSTER:  Luckily, lawmakers appear to be reaching bipartisan consensus on the proposal.  So far, Democrats and Republicans appear to be united in opposing the amorphous bailout.

(BEGIN VIDEO CLIP)

SEN. BOB CORKER, ® TENNESSEE:  And that you bring back to us a fully baked concept with the markets knowing that that is what you‘re working through, and that we have something intelligent and well-constructed to actually certify to go to the lengths that you‘re talking about doing now.

It seems to me that that is very workable and you would be sending a signal to the markets and, in fact, over the next 60 to 90 days, you would know which of these things is working and which is not.  That just seems to me to be prudent.  And I can‘t imagine why that is not acceptable to you, even though—I just can‘t imagine that.

(END VIDEO CLIP)

SHUSTER:  Vice President Cheney was sent to Capitol Hill today to try to convince members of his party to accept the administration‘s proposal.  But “Politico” is reporting tonight that House Republicans rose up en masse against their vice president.  One unnamed lawmaker is saying, quote, “The problem is that they‘ve used up a lot of goodwill.”

The Republican nominee for president also took questions today, at least, a few of them.  Senator McCain‘s first press conference in six weeks clocked in at only 11 minutes long and that includes his opening statement, 26 seconds of it was devoted to his claims of being against the so-called “golden parachute” that CEOs received, while still being for senior financial adviser, Carly Fiorina, who received a $40 million severance package from Hewlett-Packard despite 20,000 employees getting laid off.

(BEGIN VIDEO CLIP)

MCCAIN:  I believe that Carly Fiorina is a role model to millions of young American women.  She started out as a part-time secretary and she ended up as CEO of one of the major corporations in America.  I‘m proud of her record and so I‘m—I want everybody to know that Carly Fiorina is a person that I admire and respect.

(END VIDEO CLIP)

SHUSTER:  Senator McCain also claimed that how he votes on the bailout should be irrelevant.

(BEGIN VIDEO CLIP)

MCCAIN:  I hope that Democrats would recognize that this issue should not be in any way related to my vote.  This issue should be and their vote should be determined in how we can resolve this crisis and get America going again.  This is a huge crisis.  We know.

So to somehow for the Democrats to say that their vote is going to be gauged on my vote, frankly, doesn‘t do them a great deal of credit.

(END VIDEO CLIP)

SHUSTER:  Lots to talk about tonight with MSNBC political analyst Howard Fineman, also, the senior Washington correspondent for “Newsweek” magazine.

Good evening, Howard.

HOWARD FINEMAN, MSNBC POLITICAL ANALYST:  Hi, David.

SHUSTER:  Howard, is this shaping up to be merely the sound of rebellion before the Bush administration gets exactly what it wants, or is there enough opposition and perhaps enough backbone on Capitol Hill that those significant sticking points might actually be resolved before possible passage?

FINEMAN:  Well, David, this isn‘t just the sound of rebellion—with each passing minute, with each minute of the hearings today, I think the questions grew, the opposition deepened, and I think the rebellion is real.

Now, what that means in the end, I think, as you‘re indicating is that the Democrats and other critics of this, including a lot of Republicans, are going to get a lot of what they want.  They‘re going to get more detailed.  They‘re going to get more protection directly for homeowners.

The measures that Hank Paulson called punitive about “golden parachutes” for bank CEOs are going to be put in place, and the oversight is going to be real and it‘s going to be deep.  So I think the rebellion is real.

SHUSTER:  Howard, it used to be that the mere mention of Vice President Cheney would be enough to quell a conservative rebellion, what‘s the story there?

FINEMAN:  Well, David, as “Politico” was saying, you know, there was a revolt there today.  They don‘t believe Dick Cheney anymore.  He has used up a lot of credibility.

The Republicans are the ones who followed Dick Cheney over the edge of the cliff, in the view of many of them, privately, on the war in Iraq.  He‘s the one who said that there was a slam dunk war to be won in Mesopotamia.  And a lot of Republicans don‘t like it.

Also, the Bush-Cheney White House has been pretty cavalier in its attitude toward Congress, including, if not especially, Republicans in Congress.  They basically ignored them.

And there are two other points, David.  A lot of the young Republicans in Congress are populist Republicans; they‘re not Wall Street Republicans.  They‘re not old-fashioned Rockefeller and Henry Kissinger politicians who care about Wall Street, number one.

And number two, they‘re all people who don‘t like the idea of big government and they‘re aware of the fact that both because of the war in Iraq, the passage of the Patriot Act, and now these big bailouts, the Bush administration has presided over the biggest expansion of federal power since the new deal and these Republicans that I mentioned don‘t like it and they blame Cheney for it.

SHUSTER:  Now, as far as the Democratic side of the aisle is concerned, is this the Democrats‘ chance to veto the kind of blank check authority that they gave the Bush administration on the Iraq war, something that Congress could never dial back again.  I mean, does it look as if they might have learned their lesson?

FINEMAN:  Well, I think that‘s the sentiment among many of the ones that I have talked to.  But I think it‘s the wrong sentiment.  I mean, they can‘t be fighting the last war here.  Ironically, they should have had the backbone back then to oppose the war.

Now, if they decide they‘re going to scuttle any bailout bill just to teach Bush a lesson, I think, they‘ll be making a big mistake.  And I think, at the end, that‘s not what‘s going to motivate them.

I think they want to do something here, David.  But, I think, they want the protections for homeowners, they want to clamping down on the CEOs of the big banks and the financial institutions.  They want the oversight.  They probably won‘t get the equity stake they‘re talking about, I think Paulson will draw the line there but they‘re going to insist on a lot of these things before they weight this thing on through.

SHUSTER:  And are they getting any of the details in terms of the mechanisms by which the federal government will determine the value of these bad loans and bad debt when the private market couldn‘t do that?

FINEMAN:  That‘s right.  And that‘s, I think, one of the things Hank Paulson is looking for by wanting to shield from second guessing by administrative agencies or the courts his valuation of these assets because that‘s the key to the whole thing.  That‘s why Paulson put that language in there that you showed at the beginning of the segment.  But Congress isn‘t going to stand for that.

SHUSTER:  If Democrats in Congress and conservative Republican lawmakers are resisting this proposal for, obviously, vastly different reasons, reasons that, of course, could not be more different.  How is consensus ever going to be reached?

FINEMAN:  Well, I think, we‘re in a dangerous time here, David, because we‘re at the end of an administration that has very little credibility left with either the American people, the Congress or the world, for that matter.  George Bush had basically checked out before he was dragged up to the bridge for this.

Also, Barack Obama and John McCain are not rushing back to Washington to take command of this situation.  As in fact, I think, they probably should.  But after all, they‘re not in power yet.

So we have this odd situation where the outgoing administration is writing the script for whichever the new man becomes the next president.  Obama and McCain arguably should be here, should be in the thick of it, but they‘re kind of playing a game of chicken in reverse.  Neither of them wants to take responsibility for what Congress is about to do.

SHUSTER:  Howard Fineman of “Newsweek” and MSNBC.  Thanks for coming on.

FINEMAN:  Thank you, David.

SHUSTER:  Coming up: Will the Democrats avoid giving the Bush administration yet another blank check?  Representative Barney Frank will join us to talk about the economic crisis, next.

Conservative commentator George Will says John McCain is not fit to be president.

And, Barack Obama talks about the economy, Hillary Clinton, and Sarah Palin in his interview with Matt Lauer.

A lot is ahead tonight on COUNTDOWN.

(COMMERCIAL BREAK)

SHUSTER:  Coming up: The big bailout.  What powers will the Democrats give the Bush White House?  And what would (INAUDIBLE) public get out of the deal?  Congressman Barney Frank is next.

And the big face off, tensions rise between McCain and the media and the senator blinks.  But Governor Palin is still off-limits for questions.

That and more: Ahead on COUNTDOWN.

(COMMERCIAL BREAK)

SHUSTER:  And in TV news as in politics, there‘s one thing you must never, ever do.  It‘s this.

Our fourth story tonight: The politics of waiting.  President Bush is warning Democrats they must not wait but must act now to bail out Wall Street the way he wants to or the economy will be, well, even worse.

But on a Republican blog, one consultant is urging Republicans in tight races to vote against the bailout and attack Democrats who vote for it.

Quote, “God himself couldn‘t have given rank-and-file Republicans a better opportunity to create political space between themselves and the administration.  Let this be the political establishment—Bush Republicans and the White House, plus Democrats in Congress—saddling the taxpayers with hundreds of billions in debt—more than the Iraq war conjured up in a single weekend and enabled by Pelosi, by the way—while principled Republicans say, “No” and go to the country with a stinging indictment of the majority in Congress.

A bailout may be inevitable, but so too can be the political benefit for congressional Republicans if played correctly.”

This open call for Republicans to vote based not on, say, country first, coming from Patrick Ruffini, a former RNC staffer who‘s Web site says, it‘s a joint project with a veteran of the McCain campaign who was suspended this spring for circulating an anti- Obama Web video.

Right in the middle of the bailout battle is Massachusetts congressman, Barney Frank, chairman of the financial services committee.

Congressman, thanks for your time tonight.

REP. BARNEY FRANK, (D) CHAIRMAN, FINANCIAL SERVICES COMM.:  You‘re welcome.

SHUSTER:  With or without Democratic revisions, if Democrats pass this bill, what‘s to stop this guy‘s strategy from working in November?  Will you insist that McCain get onboard as well?

FRANK:  Well, not McCain, but Speaker Pelosi is insisting that there be a significant number of Republican votes for this.  But you can‘t stop scurrilous people like that hack from doing this.  I think that a large number of people expect that you should be responsible.  But Speaker Pelosi has said, if this is going to pass, it should be in a bipartisan way, probably because we‘re talking about the country here, and it‘s not healthy to the country—you know, part of this is about psychology—to have this done in a partisan way. 

It‘s also the case that we are changing the bill very substantially from what the president sent in.  The president sent in a bill that was kind of a Dick Cheney wish list, “I‘m in charge and I‘ll do whatever I want and nobody can stop me.”

We are putting in a number of changes that will restrain CEO compensation; that will control the unchecked executive power.  One of the things you will talk about in the previous segment, very important, is how do you set the price?  Well, nobody can be confident of that now of what you‘re buying.

So, for that reason, we, Senator Dodd and I, are working on very strong oversight language so that, literally, every transaction that they engage in, every time they buy something, they will be reported to an independent oversight board.  The price that they paid for will be made clear so that in the process, if there does appear a pattern of overpaying or underpaying, that‘s going to come out as this information is made very public.

SHUSTER:  But, Congressman Frank, on that very point, if you don‘t know the mechanism by which the federal government is going to try to evaluate the value of these bad debts and bad loans, how can—I mean, how can anybody support it?

FRANK:  Well, we will know that.  First of all, literally, every transaction as soon as it is completed will have to be reported.  We will know the price they paid.  You can infer an awful lot about how they got there when we get the price.  We will know.

So, if they paid way too little, then you‘re going to have other people say—well, wait a minute, we would have bought that for more.  If they paid too much, you‘re going to have a flood of people saying—well, buy mine.

Secondly, we will have an oversight board that will have the power to say to them—please explain to us what the process is.  It‘s an independent board that will have its own staff and its own budget.  And they will have the power, unlike in the president‘s bill, to say to them—all right, will you now explain to us how you are deciding (A), what to buy or where to invest and how much to pay for it.

SHUSTER:  Well, let‘s talk a little oversight.  Now, as far as the price tag, are you confident that $700 billion is accurate?

FRANK:  No.  No one is.  It‘s an educated guess.

By the way, going back to that Republican hack you quoted, the notion that it‘s going to cost more than the Iraq war is nonsense because we are talking about X-hundred billion of assets we‘re going to buy.  Clearly, the great majority of that will be recovered.  Whether it‘s 80 percent or 70 percent, we don‘t know.  But this is going to be not much more than 20 percent, at most, of the Iraq war.  I couldn‘t understand why they keep trying to hide the cost of that war.

SHUSTER:  But isn‘t that the delicate balancing act?  I mean, if the government overpays and the taxpayer gets stuck with the losses, right?  Because you won‘t recoup the money that you laid out.  Or if the government underpays, what the government essentially tells to the banks, fine, we‘ll give you a nickel on the dollar, then the banks are going to suffer.

FRANK:  No.  That‘s not a delicate balance on the point I was talking about.  I‘m not talking about whether we‘re going to break even or not.  I am saying that a substantial amount will be recovered.  We‘re going to pay, whether we underway or overpay will affect the amount.  But there‘s nothing like $700 billion or whatever hundred billion is originally put at risk, that‘s going to be paid out.  We‘re clearly going to get more than 50 percent back.

So I‘m just dealing with that silly comparison to the Iraq war.

SHUSTER:  Fair enough, though.  Are there any guarantees that you or Secretary Paulson or President Bush can give that this will help the economy and make the economy in better shape?

FRANK:  No.  We hope it will.  Look—here‘s the issue.  In the first place, I‘m not in the business of giving guarantees.  This is a problem that was created by the prevalent right-wing philosophy of not regulating.  These people said to us, Dick Armey, the Republican leader during the 12 years that they were in control, for much of it, the markets are smart and the government is dumb.

Ronald Reagan 28 years ago said, “Government is not the answer to our problem, government‘s the problem.”  And they, unfortunately, had the political power to resist those of us who wanted what we thought was sensible regulation.  We now have a terrible problem that was created by bad private sector decisions carried out without regulation.  I understand that.  We have to undo that.

We are committed, by the way, next year, to putting in place the kind of regulation that will stop this from recurring.  And that‘s one guarantee we can give people that we will be able to stop this from becoming a recurrent pattern.

Now, we have to deal with it.  Unfortunately, the victims of these bad decisions won‘t just be the people who make them.  There will be people trying to get auto loans, and the people trying to sell cars. There‘d be people trying to refinance houses.  There‘d be people trying to buy furniture or sell furniture.

So we do have to do something.  But we are determined to do it in away that gives some direct benefit and not just to people who made the mistakes in the first place, but to a lot of other people.

SHUSTER:  Congressman Barney Frank from Massachusetts.  Congressman, thanks for coming on.  We appreciate it.

FRANK:  You‘re welcome.

SHUSTER:  Governor Sarah Palin is getting some face time with world leaders and former secretary of state, Henry Kissinger right here in New York city, but reporters aren‘t getting any time to question her and that‘s just one of the things adding to the growing powder keg between the McCain camp and the media.

And why is this chicken in a shirt?  We know more about that then Sarah Palin‘s foreign policy perspective.  Oddball is next on COUNTDOWN.

(COMMERCIAL BREAK)

SHUSTER:  If you think Sarah Palin is the first vice presidential candidate to try and talk over the heads of the news media with her message, then, you‘re forgetting about Richard Nixon.  It was on this date in 1962 that Nixon, who Dwight Eisenhower had just chosen as his running mate and he was under attack for allegedly taking illegal campaign contributions, delivered an address to the nation proclaiming his innocence and admitted he got a free dog and his kids were keeping it.  Nixon dodged a political bullet, went on to become vice president, and he never got in any trouble ever again, or did he?

On that note, let‘s play Oddball.

We begin in Palmdale, California where last night, Keith told you about the singing highway, a magical stretch of broad black top that plays the “William Tell Overture” as your tire speed over it, tonight, we have the actual road‘s audio.  And if you close your eyes and just listen, it sounds like you‘re running over the Boston Pops Orchestra.

(MUSIC)

SHUSTER:  I hope you took that all in because tomorrow, the road gets repaved.

To Somerset, England, where discerning chickens are wearing stripes this season.  This is Buffy (ph) the Hen, who was rescued from an overpopulated chicken farm where she had been plucked clean.  She arrived at the rescue center underweight and unhappy.

But now, with her new strength, well, she‘s pecking around with the rest of the girls like the whole thing never happened.  Her keepers are hoping to find the fashionable foul a new home, but I‘m sure the hen is aware that in chicken fashion, one day you‘re in, and the next day you‘re satisfying fans of McNuggets.

So, good luck.

Finally to Star City, Russia, at a press conference for an American Richard Garriott, who is set to become a space tourist next month.  Garriott is a video game designer who ponied up a cool 30 million dollars in rubles for the right to blast off.  What‘s even more notable is that Garriott‘s father is NASA astronaut Owen Garriott, who made two trips into outer space.  This makes them the first American father and son to leave Earth.  The Russians also sent a dad and his boy up there.  And, of course, there was that father and son duo from the planet Tatoin, who almost destroyed an entire galaxy.  Sorry, I should have said spoiler alert. 

(END VIDEO CLIP)

SHUSTER:  Governor Sarah Palin‘s meeting with world leaders, but she‘s not taking questions from campaign reporters.  The press fights back after the McCain campaign tries to orchestrate a day of photo op coverage.  The Obama interview, everything from the bailout to Sarah Palin‘s impact on the electorate.  Much more ahead on COUNTDOWN.

(COMMERCIAL BREAK)

SHUSTER:  Sarah Palin landed in the New York area last night and today kicked off a two day international tour of sorts, meeting with a round of high profile world leaders during the United Nations General Assembly.  The trip was planned to bolster Palin‘s foreign policy cred, since she‘s never met a foreign head of state and apparently being able to see Russia from her house doesn‘t quite cut it. 

Unfortunately, the McCain/Palin spin squad hijacked their own headlines this morning.  Our third story in the COUNTDOWN, spin control got out of control when the campaign tried to block media coverage of the governor‘s sit-downs.  These images of Sarah Palin and Afghan President Hamid Karzai and Colombian leader Alvaro Uribe almost didn‘t make air.  That‘s because up until a little over an hour before the first meeting was to start, most members of the pool, a network producer, print and wire reporter were told no. 

The only yes, a cameraman.  So basically, no risk of questions and all the reward of pictures.  And you know when Fox News complains, it‘s bad.  Ultimately, when told that no access would mean no airing of the pictures or video, the campaign relented.  And later in the day, the candidate who aside from two TV interviews has not been available to media since she has was nominated, allowed the press to cover a meeting with Henry Kissinger. 

(BEGIN VIDEO CLIP)

HENRY KISSINGER, FMR. NATIONAL SECURITY ADVISER:  I‘m going to him a lot of credit for what he did in Georgia.

PALIN:  Good, good.

UNIDENTIFIED MALE:  Thank you very much. 

PALIN:  And you‘ll give me more insight that, also, huh?  Good.

(END VIDEO CLIP)

SHUSTER:  She even answered a reporter, “Great, great,” when asked how it went.  Perhaps Kissinger and the governor also discussed glasnost because later in the day, the campaign issued the following mini-manifesto:

“we regret the mix up and were happy that the pool had access to the Governor‘s meetings with President Uribe and Dr. Henry Kissenger (sic).”

Incidentally we hear at MSNBC did not misspell Dr. Kissinger‘s name.  That version came from Palin‘s gang.  Richard Wolffe is “Newsweek‘s” senior White House correspondent and an MSNBC political analyst.  Good evening, Richard.

RICHARD WOLFFE, “NEWSWEEK”:  Good evening, David.

SHUSTER:  Richard, have Sarah Palin‘s people done her a disservice by further agitating reporters, chasing her with that episode today? 

WOLFFE:  Well, it‘s a curious strategy for a campaign that‘s basically run by communications people.  Steve Schmidt, Nicole Wallace, they‘re all media people.  To freeze out the media and block them from all access like this is curious.  The McCain campaign seems to think there‘s a benefit in declaring war on the media.  They think it riles up the base. 

But these are actually very tightly controlled situations.  That‘s why presidents love them.  That‘s why President Bush loves them.  It‘s very easy to use the foreign leader as a foil, just to limit yourself to pleasantries and escape with all the benefits of a photo op without the down side of extended questioning. 

So, again, you have to scratch your head and say what kind of media strategy is it?  It doesn‘t really make sense to keep people out when the questions are pretty innocuous. 

SHUSTER:  Even Fox News complained publicly about this.  Will this hurt Palin or will her supporters just turn around and blame the campaign handlers? 

WOLFFE:  This is a situation where if they pull this off, if McCain and Palin win this election, they‘ll be treated as complete geniuses.  The handlers will have rewritten the rules for presidential elections.  And no future presidential candidate will ever talk to the press.  Or people will turn around after their defeat and say, what on Earth were they thinking?  Why would you want to declare war on the press when you have actually a very compelling candidate with a lot of charisma in Sarah Palin who can handle these things. 

And John McCain, after all, made his name taking all sorts of questions from the press.  So either this is going to be spectacularly successful or it‘s not. 

SHUSTER:  Where‘s the tipping point?  At what point does Sarah Palin run the risk of voters conclude if she can‘t handle a few questions from a group journalist, how can she handle someone like Vladimir Putin? 

WOLFFE:  It‘s a good point.  I‘m surprised the Obama campaign hasn‘t really used this one.  If you put yourself out there as Governor Palin has as a tough, moose hunting, elk eating person, then really toughness in this sort of situation shouldn‘t be a problem.  The other issue that they‘ve got to face here is this just raises the pressure in the pressure cooker for that vice presidential debate.  There‘s no valve here.  The expectations, the questions build up. 

Much easier to deal with these mini, again, very tightly controlled question sessions as a sort of dry run for a debate, rather than letting the pressure build.   

SHUSTER:  Richard, the whole point of Palin‘s trip to New York was to show her as a leader with foreign policy chops.  Does just merely having the photos, does that help? 

WOLFFE:  Yes, it does help.  It takes the Charlie Gibson question, have you ever met a world leader before off the table.  And of course remember Governor Palin said that, mistakenly, that other vice presidential candidates hadn‘t met world leaders.  Well, now she can say she‘s met world leaders.  The photos are helpful.  And it would be even more helpful if we heard her talking about foreign policy. 

SHUSTER:  One of tomorrow‘s meetings is with Bono.  Why? 

WOLFFE:  You know, Bono has played this extremely well.  He works with Cindy McCain.  He works with Republicans and Democrats.  And, you know, this is all about advancing the agenda, eradicating poverty in Africa, dealing with disease.  Sarah Palin, you know, he actually has got a lot of support, Bono has, from evangelical Christians, as he has from progressives and Democrats across the spectrum.  So why not bring Sarah Palin into the fold? 

SHUSTER:  Except that Bono doesn‘t seem to be afraid of the media and all of us will be calling him to see what his reaction is. 

WOLFFE:  Exactly.  Hope he‘ll help us there. 

SHUSTER:  Richard Wolffe of “Newsweek” and MSNBC.  Richard, thanks as always.

WOLFFE:  Thank you, David.

SHUSTER:  John McCain may have an even bigger problem with the talking heads on his side of the fence.  Conservative columnist George Will puts it simply, “McCain is not suited to be president.”  Rachel Maddow joins us. 

And Senator Obama weighs in on the vice presidential talk.  Any regrets he didn‘t pick Senator Clinton?  And his take on the Palin effect ahead on COUNTDOWN.

(COMMERCIAL BREAK)

SHUSTER:  This year if you want to get specific about the Sunshine State, the phrase for election night may not be Florida, Florida, Florida, but Tampa, Tampa, Tampa.  The latest NBC News/Mason Dixon polling now shows Barack Obama now up two in Florida.  Pollsters who know about these things point to Obama‘s performance in the Tampa Bay area as the reason for his edge.  Tampa bay is usually a good indicator for which way the entire state will go.  In that internal poll, Senator Obama leads Senator McCain by six, 49 to 43. 

In our number two story, before he went underground to prepare for Friday‘s big debate, Barack Obama, who is doing his home work in Florida, sat down with “The Today Show‘s” Matt Lauer to talk about, among other things, what he sees as deal breakers in the proposed financial market bailout. 

(BEGIN VIDEO CLIP)

OBAMA:  There are a couple of core principles I think have to be in place. 

MATT LAUER, “THE TODAY SHOW”:  Deal breakers. 

OBAMA:  Deal breakers.  I think you have to have some mechanism of oversight. 

LAUER:  Both sides agree on that. 

OBAMA:  Both sides agree with that.  The administration hasn‘t been entirely clear on whether they agree with it.  But the bottom line is you can‘t give one person authority over 700 billion dollars without any oversight.  I think that‘s important. 

The second thing that‘s going to be important is to make sure that the criteria by which firms participate, the way it‘s set up, assures that tax payers are going to get the upside and not just the downside.  We want to make sure that tax payers are benefiting. 

Third principle is it can‘t be simply a bailout for investors, CEOs, share holders.  They‘ve got to take a hit for the bad decisions they make. 

LAUER:  How much time do you have to vet this?  The talk is this has to get done in the next week or two weeks.  If you‘re lucky enough to be elected president, and it turns out this plan has flaws, they‘re not going to want to hear from you we were rushed into this.  They‘re going to say, you voted yes, pal.  It‘s yours. 

OBAMA:  This is why we‘ve got to think about this in two phases.  We have a short-term crisis that has to be dealt with in a bipartisan fashion.  Then we have a long-term set of structural problems we have to deal with. 

If you have health care, my plan will lower your premiums. 

LAUER:  You have laid out an ambitious plan.  You want to improve health care.  You want to improve education, the infrastructure, investment in energy and, oh, boy, here comes this 700 billion dollar bill that wasn‘t a part of your thinking when you laid out this plan.  If I‘m a voter and I‘m trying to decide whether I want to vote for you or Senator McCain, don‘t I have a right to know right now from you which of those things are going get hit by the budget axe before I vote for you? 

OBAMA:  Although we are potentially providing 700 billion dollars in available money to the treasury, we don‘t anticipate that all that money gets spent right away and we don‘t anticipate that all that money is lost.  How we‘re going to spend that in budget terms still has to be decided.  Does that mean I can do everything that I have called for in this campaign right away?  Probably not.  I think we are going to have to phase it in.  And a lot of it is going to depend on what our tax revenues look like. 

LAUER:  As part of this whole economic picture was the AIG situation. 

On Tuesday night, the Fed decided to bail them out, a huge amount of money.  That morning, prior to the bailout, John McCain said that the federal government should not bail out AIG.  You chastised him on the campaign trail. 

OBAMA:  He said the government should stand aside and allow one of the nation‘s largest insurers, AIG, to collapse. 

LAUER:  So the message to those voters, John McCain didn‘t grasp the scope of the situation and get the fallout from the failure of AIG? 

OBAMA:  I think what has been clear during this entire past ten days is John McCain has not had clarity and a grasp on the situation. 

LAUER:  John McCain said that on our program. 

OBAMA:  Right. 

LAUER:  To me.  Three minutes later, in an interview with Meredith Vieira, Joe Biden, your running mate, was asked the exact same question, should the federal government bail out AIG, and he said no.  The federal government should not bail out—

OBAMA:  And I think that in that situation, I think Joe should have waited as well. 

LAUER:  But it‘s the kind of thing that drives people crazy about politics.  It sounds like you were trying to score some political points against John McCain using his words when your own running mate had used very similar words. 

OBAMA:  No, hold on a second.  Matt, I think what drives people crazy about politics is the fact that somebody like John McCain, who for 26 years has been an advocate for deregulation, for 26 years has said the market is king, and then who starts going out there suggesting that somehow he‘s a populist who‘s been railing against Wall Street and regulation.  That‘s what drives people crazy. 

LAUER:  Prior to the conventions, according to a lot of polls, you had about between an eight and ten point lead among white women.  After the conventions, according to the one of the latest polls, that lead stands with John McCain by about eight percent.  How can you not sit around in a room with your top advisers and rethink the idea of putting Hillary Clinton on this ticket? 

OBAMA:  Listen, listen.  I am a great admirer of Senator Clinton‘s.  And she has been extraordinary in her support of our campaign.  She‘s been campaigning with me.  I talked to her yesterday about the situation with the bailout.  She‘s a close adviser and hopefully will be that going forward.  Joe Biden is also an outstanding public servant and I am very proud of the choice that I made. 

LAUER:  If Sarah Palin has added enthusiasm and vigor to the McCain campaign, what has Joe Biden added to your campaign? 

OBAMA:  What Sarah Palin, I think, has done is gotten a lot of Republicans who were unenthusiastic about John McCain more enthusiastic.  But those probably were not my voters.  So that‘s part of what‘s happened.  There‘s no doubt that you have seen more energy among Republicans.  And that‘s fine. 

Here‘s the thing, though, Democrats we have been enthusiastic for a long time. 

(END VIDEO CLIP)

SHUSTER:  Matt Lauer‘s interview with Senator Obama.  One quick note about last night‘s COUNTDOWN: in a discussion about earmarks Senator John McCain had requested, this program reported that McCain had requested nine million dollars for a national mediation center in Arizona.  That money was appropriated through the normal appropriations process and was not an earmark.  We regret the error. 

Coming up, the war against McCain from inside the Republican party.  Conservative columnist George Will adds his voice to others on the right who say Senator McCain has been acting like anything but a president over the last several weeks.  Rachel Maddow joins us next on COUNTDOWN.

(COMMERCIAL BREAK)

SHUSTER:  In his column today, the conservative icon George Will reveals that John McCain may have just lost one of his most important conservative constituencies, George Will.  Our number one story, a small C conservative who‘s also often a big C conservative suggests that McCain is just too risky.  The highlights: McCain is, quote, “under the pressure of the financial crisis behaving like a flustered rookie playing in a league too high.”

Barack Obama, Will says, is not behaving thusly.  In fact, Will says it‘s not the Democratic candidate but the Republican McCain who‘s call for firing of the SEC chairman makes him guilty of, quote, “channeling his inner queen of hearts.  You know, off with his head, furiously and apparently without even looking around at the facts.  A childish reflex and fact free slander, a smear that serves as a harbinger of a McCain presidency.” 

His attack ad against Obama, quote, “characteristically substituting vehemence for coherence.” 

And the final touch: “the more one sees of his impulsive, intensely personal reactions to people and events, the less confidence one has that he would select judges by calm reflection and clear principles, having neither patience nor aptitude for either.  It is arguable that McCain, because of his boiling moralism and bottomless reservoir of certitudes, is not suited to the presidency.  Unreadiness can be corrected, although perhaps at great cost, by experience.  Can a dismaying temperament be fixed?”

It‘s not on that we say let‘s bring in MSNBC‘s own Rachel Maddow to explain why she agrees with George Will.  Rachel, thanks for letting us fulfill this life long dream. 

RACHEL MADDOW, MSNBC ANCHOR:  Every once in a while, the world spins so fast, it catches up with itself.  I think that‘s right, David.

SHUSTER:  Can you frame this for us?  Give us some idea how big a deal Will‘s apostasy is. 

MADDOW:  I think that this is the political common wisdom of the last seven years finally becoming true after seven years in which it really wasn‘t true.  After George Bush beat John McCain in the 2000 Republican primary for the presidential nomination, and McCain essentially ran against Bush to Bush‘s left at that point, and after he lost that election, John McCain certainly went to Bush‘s left in terms of sort of taking on right wing elements of the Republican party.  That‘s where he earned a lot of these maverick stripes for taking on his party. 

The political common wisdom at that time became John McCain can‘t get the Republican presidential nomination because John McCain can never bring conservatives along.  That political common wisdom hasn‘t really turned out to be true until now.  Just because—as we see people like George Will, people like David Frum, people like David Brooks and others finally start to take McCain on in a way that a lot of people thought they would be taking him on much earlier. 

SHUSTER:  Will is focused on the financial crisis and the types of judges McCain will pick in this column.  But earlier this month, Will also took issue with the selection of Sarah Palin, noting that she has negligible experience.  As the Palin pick reflects on McCain, is there a troubling pattern that some conservatives are seeing in all of this? 

MADDOW:  It‘s interesting, if you compare the way that George Will responded to the Palin pick, it looks an awful lot the way he responded to Bush choosing Harriet Myers.  George Will has identified himself as one of the intellectuals in the conservative movement that wants to feel like decisions are backed up by reasoning and by politics, not just by gut really.  He reacted to this much as the Harriet Myers pick.  It‘s not that George Will has been uncritical of the Bush administration, but that‘s exactly the kind of decision that he‘s been uncritical of. 

There‘s two ways to interpret how John McCain picked Sarah Palin.  Either somebody told him he couldn‘t pick Joe Lieberman or Tom Ridge, who he really wanted to pick, and then we ought to know who is giving John McCain orders, or he made it as a gut check move.  We have seen how that worked with Harriet Myers, with Alberto Gonzales, with Vladimir Putin and the list goes on. 

SHUSTER:  Can we infer thereby that Will thinks that McCain lacks a certain maturity or at least lacks a certain thoughtful temperament? 

MADDOW:  I think you can certainly infer that.  I think he‘s more than implying it.  He‘s downright saying it.  As you said, the last line of his column today is “can a dismaying temperament be fixed?”  He calls John McCain flustered.  He says he has childish reflexes.  This is an issue that I think the Obama campaign and even many Democrats outside the campaign have been reluctant to take on directly, this idea that John McCain might have a temperament that‘s not suited to the presidency, that he might be a guy who you don‘t really want that close to the nuclear football.  I think the Democrats have danced very carefully around that issue in part out of their respect of his serving as a POW, in part wanting to be kept insulated on charges that they‘re taking him on on the basis of his age. 

But if conservatives are the ones who are going to takes this on, I think that means it‘s back in play.  And this might be one of the things that gets discussed in a main stream way in the campaign. 

SHUSTER:  When Republicans like McCain and Bush say they‘re going with their instincts, as you say, the subtext is that they‘re tapping into something authentic and essential about themselves, something principled and unchanging that Democrats lack.  But Will says that it‘s McCain that lacks, quote, clear principles.  At the close of the Bush years, are we now seeing Republicans abandon this claim that you‘re principled as long as you feel something in your gut? 

MADDOW:  Maybe we‘re seeing that from some elements of the conservative movement and some elements of the Republican party.  But I do think that‘s a very visceral American form of campaigning.  And I don‘t think we should expect Republicans to leave it behind.  I think it‘s fascinating to see this tension among Republicans, among conservatives about whether or not that is an OK way, not only to campaign but to govern.  The sort of sense of certitude, the sense of instinct, this anti-intellectualism that has been the hallmark of the Bush administration.  I think it‘s certainly been criticized on the left.  To see it criticized on the right is fascinating.  And I think it will be interesting to see if what Will is criticizing McCain for really catches on. 

SHUSTER:  Rachel Maddow.  Rachel, a pleasure talking to you.  And congratulations on a terrific start to your show. 

MADDOW:  Thanks, David.  I appreciate it. 

SHUSTER:  That will do it for this Tuesday edition of COUNTDOWN.  Keith will be back tomorrow.  I‘m David Shuster.  Thanks for watching.  Our MSNBC coverage continues now with “THE RACHEL MADDOW SHOW.”  Rachel, we‘re going to give you some time back.  Take it away. 

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

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