updated 9/25/2008 5:52:23 PM ET 2008-09-25T21:52:23

RACE FOR THE WHITE HOUSE

September 24, 2008

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

Guests: Barney Frank, John Harwood, Erin Burnett, Tom Brokaw, Nancy Pfotenhauer, Mike Murphy, Bob Shrum, Richard Wolffe, Michelle Bernard, Lawrence O'Donnell, Ari Fleischer

DAVID GREGORY, HOST: Tonight, uncharted territory. John McCain suspends his presidential campaign to return to Washington and asks for a delay of Friday's debate to deal with the economic crisis.

A special RACE FOR THE WHITE HOUSE tonight is next with my guest, Democratic Congressman Barney Frank; NBC News Special Correspondent and moderator of "MEET THE PRESS," Tom Brokaw; and Ari Fleischer, former press secretary to President Bush.

That and more, as the RACE FOR THE WHITE HOUSE rolls on.

Welcome to the program. I'm David Gregory.

My headline tonight, "McCain Posts a Bailout Surprise."

With 41 days left to go in the election, Senator John McCain announced today that he will suspend his presidential campaign so he can return to Washington to deal with the economic crisis.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN ®, PRESIDENTIAL CANDIDATE: It has become clear that no consensus has developed to support the administration's proposal. I do not believe that the plan on the table will pass as it currently stands. And we are running out of time.

Tomorrow morning, I'll suspend my campaign and return to Washington after speaking at the Clinton Global Initiative. I've spoken to Senator Obama and informed him of my decision, and I've asked him to join me.

(END VIDEO CLIP)

GREGORY: Following Senator McCain's statement this afternoon, Senator Obama responded that it was initially his idea to offer a joint statement on the economy. He said the two had spoken by phone earlier today to discuss that statement. Then McCain also proposed delaying Friday's planned presidential debate, but Obama pressed for the debates to go ahead as planned.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: With respect to the debates, it's my belief that this is exactly the time when the American people need to hear from the person who in approximately 40 days, will be responsible for dealing with this mess. Presidents are going to have to deal with more than one thing at a time. It is not necessary for us to think that we can only do one thing and suspend everything else.

(END VIDEO CLIP)

GREGORY: And word tonight from the Presidential Debate Commission. It has announced that it indeed will move forward with Friday's debate as scheduled.

All of this comes as President Bush prepares to address the nation tonight with another appeal for his $700 billion rescue plan for Wall Street, a rescue that needs to be saved due to ongoing opposition on both sides of the aisle. The president, White House sources saying tonight, will talk about how the country got here and the way forward.

Joining me now is Democratic Congressman of Massachusetts, Barney Frank. He is the chairman of the House Financial Services Committee. He joins us from Capitol Hill, and he has been right in the middle of these negotiations with the White House.

Congressman, good to have you here.

REP. BARNEY FRANK (D), MASSACHUSETTS: Thank you.

GREGORY: Let me ask you about Senator McCain's announcement today.

Is this political leadership or just politics?

FRANK: Oh, it's just a stunt. Look, we are making progress. And frankly, it sounds to me like he is trying to set himself up to take credit for something that is in the process of happening without him.

It is true that the plan that the secretary of the Treasury and the president presented on Saturday wouldn't pass. We have spent several days in a lot of conversations with outsiders who are experts, with legitimate interest groups, with members of Congress, and we're coming a lot closer.

We just finished a hearing this afternoon with the Financial Services Committee in which Secretary Paulson and Chairman Bernanke and the members agreed on certain things that we have been critical of. So the notion that he's going to come, airdrop himself in here tomorrow, it's not a subject with which he was very familiar when he was in the Congress. I think it's just a stunt.

I am glad that he and Senator Obama have said they're for it. I think Senator Obama was right to propose that. I think members need to know this is not going to be-they're not going to be isolated.

But the hard work of modifying the plan, the president presented a plan. We are adding taxpayer protections and some legitimate benefits for the average American. We are doing some things that we think will make it much more palatable. And those are going on, frankly, without any intervention by Senator McCain.

GREGORY: Well, but Congressman, I want to ask you about some of the details and whether it's going to pass. But just on this point, it's easy to be cynical on both sides of the aisle in the course of a presidential campaign. But what if Senator McCain is right, that if you suspend the campaign, you take a little of the heat out of the negotiations in what is a very difficult negotiation regardless, but particularly when you have a presidential campaign?

FRANK: It simply isn't relevant. The fact is that members of Congress, to the extent that there are political pressures, pressures that some member of Congress feel, by this time, by the way, most members of Congress, their elections are not in doubt. A lot are. But the people who are doing the negotiations are generally not people who at this point are unsure about their electoral fate.

The fact is that the presidential campaign between Senator McCain and Senator Obama has had no destabilizing effect here. We have been making progress.

The administration agreed today in testimony that yes, we have to put some limits on executive compensation. They've been resisting it. They understand that.

We've said that under the program, we've got to be able to take shares of the company with a proposal that if these companies do better, the taxpayers get some of the benefit. In other words, the presidential campaign was in no way a distraction. Frankly, it would be more distracting for Senator McCain to come in here with his entourage now and try and inject himself in the negotiations which have already progressed.

I spoke today with Secretary Paulson, with Senator Dodd, the chairman on the Senate committee. He's been working with his Republican colleagues.

I talked to Congressman Bachus who was the leading Republican on our committee. The speaker has met with Secretary Paulson and Republican Leader Boehner.

This is happening. This is Mr. McCain, frankly, I think, seeing bad polls, deciding he's going to come in, as I said, and take credit for something that's happening without him.

GREGORY: All right, Congressman. Let's talk about the substance of the bill. Is this going to pass by Friday?

FRANK: I'm not sure it will be by Friday. It's going to pass, I think, sometime within the next few days. And we do take the core of what the president asked us to take in terms of being able to intervene in the market. But we are adding, for instance, that we'll have them buying some equity in some cases, not just the bad debt of companies, but the company. So if the company profits, we get a share of it.

We've added in there a mandate that there will be some move to reduce foreclosures which they didn't have in there. We're going to add restrictions on compensation for the CEOs who participate, because they shouldn't be getting taxpayer help and then giving themselves the golden parachutes.

And we are putting up a strong oversight board. So it's not going to be the unilateral power of the secretary of the Treasury. And I respect Mr. Paulson, but no one person should have the kind of power that he has for unrestricted in the bill.

GREGORY: What impact will this bailout, if it passes, have on the housing market, the mortgage markets that are so distressed that, of course, at the bottom of all this, if they don't turn around, these distressed assets are not going to come back up in value?

FRANK: Well, first of all, in conjunction with the fact that we passed a bill in July that goes into effect in a week, and that the federal government has taken over Fannie Mae and Freddie Mac, putting all that together, and the FDIC running one of the biggest holders of mortgages, the former Indy Mac Bank, we will be able, I think, substantially to reduce the number of foreclosures. And that's important, because when you reduce the foreclosures, you're not just helping the individual who may have been imprudent in taking the loan, but these massive foreclosures has been one of the things dragging down the economy.

In this particular bill, we're going to tell the secretary of the Treasury, OK, when you buy some of these assets, you buy them in a way that will allow us then to write down the principle so that we can avoid foreclosure. That will help by slowing down the rate of decline.

Look, I think it's a good idea the housing prices came down. They were too high. But it's a question of how fast.

I think it would be a good idea if I lost 20 pounds, but not in three days. You have got to worry about the pace.

So this bill will help by reducing the foreclosures to help. And secondly, it will inject some more money into the mortgage market either by buying some of the shares, or by taking off some of the bad debt. The Federal Reserve has lowered interest rates, but if people aren't lending, that doesn't help.

GREGORY: All right. So, Congressman, the bottom line is you are you're positive her just hours before we're going to hear from the president on this subject? You're hopeful?

FRANK: Positive-I'm optimistic, yes.

GREGORY: You're hopeful about a resolution, yes? You're optimistic.

FRANK: Yes, I am.

GREGORY: OK. Congressman Barney Frank, chairman, of course, of the Financial Services Committee, in the middle of all of this.

Thanks very much for taking the time tonight.

FRANK: Thank you.

GREGORY: Joining me now with more on today's stunning turn of events both politically and in the negotiations on the Hill, Erin Burnett, anchor of CNBC's "Street Signs" and "Squawk" on the street programs; John Harwood, CNBC's chief Washington correspondent and political writer for "The New York Times."

Erin, you've been monitoring all of this. I think Congressman Frank made some news here in terms of how close they are on some of these elements of this bailout bill.

ERIN BURNETT, "STREET SIGNS" ANCHOR: I think he did, David. And I was actually listening to your key questions to him about whether this is going to get done. And again, he was emphasizing optimism.

I thought one of the things he said to you that was most interesting was, he said he wasn't sure if it would be done by Friday but in the next few days. Now, that jives with what Charles Schumer has been saying. And it is different, as you know, from a lot of the politicking and talk that we've heard throughout the day.

So, certainly, it appears that it's much more on track than some on both sides of the aisle have indicated throughout the session today. And keep in mind, David, one other thing. The Treasury secretary said two to three weeks of politicking here, we don't have that time. He made that point. And it appears from what you just got out of that interview, that it is on track and it is happening.

GREGORY: It's interesting, John Harwood. The president feels it is time to address the nation, to talk about how the country got here, how the economy got here. I'm told by White House sources that, in effect, the president wants to express the frustration that is being articulated by members of Congress and that people are feeling all over the country, which is, how is it that we're going to have such a huge bailout that taxpayers are going to fund when there have been so many mistakes made?

JOHN HARWOOD, CNBC CHIEF WHITE HOUSE CORRESPONDENT: Well, exactly. And his hope is that in expressing that frustration, he can diffuse a bit of the political opposition that's out there in the country.

We saw in our new NBC/"Wall Street Journal" poll today the country is split. Only about a third of the people saying they support this bailout. A third oppose it. And the president, if he can speak to those frustrations, but also turn from there, pivot from there to explain why it has to be done, that could go some distance toward the objective that Barney Frank was talking about.

GREGORY: Right. And you mentioned the poll. No opinion stands at 28 percent. There's a lot of people that simply don't understand it. It's very complicated stuff. And hopefully the president, in his mind, can have some impact on that.

You talked about polls. I also want to show the head-to-head here, John. I'll ask you the political question of the day.

Our new NBC News/"Wall Street Journal" poll has the head-to-head match-up this way: 46-45. Some different polls have a different spread. Ours is the best in the business. And it has it as a dead heat.

With that backdrop, John, what do you make of Senator McCain's call today to suspend his campaign? And Congressman Frank saying, hey, I hate to break it to you but neither one of you guys can have any impact here.

HARWOOD: Well, look, there is no question, whatever the margin is between Obama and McCain, there is no question, and McCain advisers concede this privately, Barack Obama has been making progress since this crisis, he's looked better than John McCain during this crisis.

I think this is like a football coach who is seeing the game go south calling a timeout. And John McCain is trying to slow things down.

The risk is that this deepens the sense that he's lurching from one political tactic to the other. On the other hand, as Barney Frank suggested, if he can somehow position himself to get credit for putting country first, which is one of his slogans, for stepping off the campaign trail, then maybe he would have reversed some of that negative momentum he's been experiencing.

GREGORY: All right. I've got to take a break here.

Thank you to Erin Burnett and John Harwood of CNBC.

Talk to you soon.

Coming next, Tom Brokaw weighs in on Senator McCain's decision to suspend his campaign you his call for a postponement of Friday's debate.

Tom Brokaw when we return.

(COMMERCIAL BREAK)

GREGORY: Back now on RACE FOR THE WHITE HOUSE. Recapping a pretty wild day on the campaign trail.

Senator John McCain announced he will temporarily suspend his campaign to return to Washington and work on the bailout plan. Senator McCain also called for Friday's debate to be postponed, but tonight the Commission on Presidential Debates tells NBC News the debate will indeed go on as planned.

Joining me now is Tom Brokaw, NBC News special correspondent and, of course, moderator of "MEET THE PRESS."

Well, Tom, a presidential address, a financial bailout plan for Wall Street, a suspension of a campaign, potential postponement of a debate. Is this pretty high-stakes stuff?

TOM BROKAW, MODERATOR, "MEET THE PRESS": Well, it is, but it's also characteristic of what we've been living with for the past 18 months or so. You've heard me say this too often for you to hear it again, David, but UFO, the unforeseen occurring.

And this has been a scrambled presidential race from the beginning. There are very big stakes here, very big challenges with this fiscal crisis that we're facing, the absence of liquidity.

I heard from a Montana banker today who is very concerned about having enough money. His bank is in good shape, but he wants to be able to loan to Main Street merchants and other people in that area.

So there is a real trickle down across the country. People are paying attention to it, and they're applying what their concerns are to the presidential campaign. Now, no one should be surprised that John McCain may be making this announcement and this decision in the best interests of his campaign, because his whole focus right now is to get elected.

GREGORY: Right.

Well, and if you talk about it politically, from his point of view, he'd like to have any part in what could be an administration, a Republican-led solution to this crisis, at least for now. Whereas Barack Obama would like nothing more than to speak in front of tens of millions of people about the bad shape that the country is in and how we got here in the course of a debate.

BROKAW: That's true. And then remember that the topic for the Friday night debate that is scheduled for Oxford, Mississippi, at Ole Miss, are foreign affairs and international issues. And it will be interesting to see how many nanoseconds it will take both candidates to turn that into a discussion of what's going on in Washington and the state of the country's economy.

Certainly, Obama will want to do that because he'll say this is not just confined to these shores. But this is an international issue.

In fact, in the last couple of days as I've been making the rounds for the U.N. General Assembly, any number of very prominent international leaders have said to me, the United States has to look beyond its own congressional hearings to the effect that this is going to have on the rest of the world, because we're all players in this together.

GREGORY: So in the end, do you think McCain goes to the debate?

BROKAW: My guess is that he'll go to the debate. But I've given up predicting during the course of this campaign, David, anything.

You will remember how many different lives John McCain has had during the course of this campaign. I think I said in St. Paul that he has been conducting this campaign as if it were guerrilla warfare. He sets up an ambush, he moves on very quickly, lives off the land.

This is one more demonstration of that. And it's worked pretty well for him up to this point.

GREGORY: It has.

Let me ask you the leadership question. You're fond of saying, I know, to people around the country that voters often want to close their eyes, imagine a crisis-they don't have to imagine it these days-and think about these two candidates in the Oval Office and try to play that out in terms of how they deal with it.

So, with that in mind, how do you define the leadership test for both of these men right now?

BROKAW: Well, I think the test really begins on Friday night at Ole Miss. We've been ramping up to that moment. Everybody has been taking the measure of them during the course of the long Republican primaries and the Democratic primaries.

They still have outstanding questions about both of them. And one of the real values of any presidential debate is that you get to not only learn what a candidate feels about given issues, but also see how their mind works, take their temperature in terms of the their personality.

It's tonal as much as it is substantive. And that's why it's going to be important what kind of leadership qualities are demonstrated that night.

You know, the seminal debate in American presidential politics, in modern times, obviously, is John Kennedy against Richard Nixon. And everyone knows that those who listened to it on the radio thought that Nixon won on substance. But anyone who watched on it television that night and saw the cool, elegant John F. Kennedy, thought that he demonstrated the greatest leadership qualities.

GREGORY: All right. We're going to take a break here, Tom, come back with you on the other side of this break.

I want to talk a little bit more about the debate, foreign affairs. Senator Biden had a big speech today to kind of set the stage for what me might here from Obama Friday night.

And more on Sarah Palin as well and her impact when we return with Tom Brokaw, right after this.

(COMMERCIAL BREAK)

GREGORY: We're back now with Tom Brokaw, NBC News special correspondent and moderate of "MEET THE PRESS," for a look at what else is on THE RACE's radar tonight.

Tom, I want to ask you about again the debate Friday night, the focus on foreign affairs. Senator Joe Biden today offering what I sort of think of as an opening argument for what Senator Obama will likely argue in the debate about foreign affairs.

Watch this.

(BEGIN VIDEO CLIP)

SEN. JOSEPH BIDEN (D-DE), VICE PRESIDENTIAL CANDIDATE: He doesn't understand that that central war on terrorism is the mountains between Afghanistan and Pakistan, where al Qaeda resides, where bin Laden lives, where the people who actually attacked the United States of America are plotting more attacks.

(APPLAUSE)

Ladies and Gentlemen on this, John McCain is more than wrong. He is dangerously wrong.

(END VIDEO CLIP)

GREGORY: So there it is, Tom, an outline, I think, of this debate about experience versus judgment.

BROKAW: Yes. And I think also, they want to shift it away from Iraq, because Barack Obama was forced to acknowledge recently in his appearance on FOX that the surge worked well beyond his own expectations. And that, if not at least stable, at least is quieter now than it has been for some time.

And Barack Obama did get a jump on Senator McCain in shifting the attention to Afghanistan, calling for more troops, more brigades to be sent in there. And in fact, any objective analysis of what is going on on the subcontinent would say that Afghanistan is a burning fuse. It remains a very dangerous place again, and it's one that we've not been able to get a grip on.

GREGORY: Speaking of Senator Biden, our new poll has a head-to-head match-up between him and Governor Sarah Palin of Alaska, John McCain's running mate, of course. And this is what it shows on the issue of qualifications.

Sixty-four percent say Biden is qualified, just 40 percent say Governor Palin is qualified. And you see the numbers as to not qualified.

How big of an issue here is the question of qualifications, and how do you assess Governor Palin's impact at this stage?

BROKAW: Well, I think we're still taking the measure of Senator Palin

pardon me, Governor Palin. Obviously, she has a lot of political charisma. She remains very popular when she appears with Senator McCain. But these are complicated times.

This financial crisis makes it tougher for her, in my judgment, to run as an experienced vice presidential candidate. In her making the rounds in New York today, getting briefed very quickly by Henry Kissinger, and then meeting with other heads of state, the first time that she's ever done that, my guess is that in the minds of some people, even people who like her personally-and there's a lot of reason to do that-it may give them some pause about whether she is ready to step into the Oval Office, especially as the running mate of a 72-year-old candidate.

Now, there are a lot of fault lines that break around Sarah Palin. Those people who are for her are really for her. And I've heard from a number of them.

And others on the other side are saying, hey, wait a minute. This is not just a popularity contest. We really have to take the measure of the person, especially during these difficult times.

Having said all that, Joe Biden has, I believe, the toughest job in these debates when he debates her in St. Louis, what, a week from tonight, I guess, right?

GREGORY: Right. Right. Right.

Finally, we're going to hear from President Bush tonight on the economy. No question, this is a president who is still relevant, even this late in his tenure, in his presidency.

What do you expect from him tonight? What are the stakes for him tonight?

BROKAW: Well, I think the stakes for him-I don't know whether he can gain much ground tonight, David, quite honestly. I think that I a lot of people have moved on beyond the Bush presidency at this point. Even members of his own party.

And watching him here at the United Nations the other day, and watching his appearances this past week from the White House, he didn't bring that kind of presidential heft to it, because most people just see him as a lame duck. It's not his personal fault, but that's where he is in his presidency. And the fact of the matter is, if he were going to get on top of this financial situation, a speech a week ago might have been more in order than a speech now at the end of the week.

Hank Paulson was working on this a week ago at this time. He was at the White House in and out. As you well know, they were dealing with Fannie Mae and Freddie Mac at that time.

That might have been a time for the president to show more robust leadership, both politically and personally, than the impact of his speech tonight.

GREGORY: All right. We'll leave it there.

Tom Brokaw.

Tom, thanks very much for coming on.

BROKAW: My pleasure, David.

GREGORY: And later on RACE FOR THE WHITE HOUSE, former Bush press secretary Ari Fleischer will share some of his thoughts both on McCain's decision to suspend the campaign, plus he'll talk about some of the polling as well, the release of our new NBC News/"Wall Street Journal" poll.

All of that and more when THE RACE returns.

(COMMERCIAL BREAK)

GREGORY: Senator McCain puts the breaks on his campaign. President Bush prepares to address the nation in prime time. And the bail out plan appears to be headed for defeat on Capitol Hill. Or does it? Another stunning day in the '08 campaign, as a new NBC News/"Wall Street Journal" poll shows the RACE FOR THE WHITE HOUSE is a dead heat.

Welcome back to the program for the back half. I'm David Gregory. John McCain announced today he will temporarily suspend his campaign starting tomorrow to focus on the financial crisis, the Wall Street bailout in Congress. He also called for Friday's first presidential debate to be suspended, a call Obama rejected.

(BEGIN VIDEO CLIP)

MCCAIN: I'm directing my campaign to work with the Obama campaign and the Commission on Presidential Debates to delay Friday night's debate until we have taken action to address this crisis.

OBAMA: Presidents are going to have to deal with more than one thing at a time. It is not necessary for us to think that we can only do one thing and suspend everything else.

(END VIDEO CLIP)

GREGORY: Tonight, the Commission on Presidential Debate tells NBC News that the debate will indeed go on as scheduled this Friday. Joining me now from McCain headquarters in Arlington, Virginia is Nancy Pfotenhauer, senior policy adviser for the McCain campaign. Nancy, good to have you here.

NANCY PFOTENHAUER, MCCAIN SR. POLICY ADVISER: Thanks for having me on.

GREGORY: Early on in the program, we spoke to Congressman Barney Frank, Democrat, chair of the Financial Services Committee, who is at the heart of the debate over this bill. He said, told us, contrary to Senator McCain's position, that this bill is headed for defeat, that the opposite is true. And he made the argument that it is all happening without Senator McCain's involvement. Listen to Congressman Frank and I'll give you a chance to respond.

(BEGIN VIDEO CLIP)

FRANK: I'm not sure it will be by Friday. It will pass, I think, sometime within the next few days. And we do take core of what the president asked to take, in terms of being able to intervene in the market. But we are adding, for instance, that we'll have them buying some equity in some cases, not just the bad debt of companies, but the company. So if the company profits, we get a share of it.

We've added in there a mandate that there will be some move to reduce foreclosures, which they didn't have in there. We're going to add restrictions on compensation for the CEOs who participate, because they shouldn't be getting tax payer help and then giving themselves golden parachute.

And we are putting up a strong oversight board. It is not going to be the unilateral power of secretary of the Treasury.

(END VIDEO CLIP)

GREGORY: So, Nancy, Congressman Frank is saying-contradicting Senator McCain that this thing is on the brink of collapse, saying he is optimistic that it will be passed. He called Senator McCain's actions today a political stunt.

PFOTENHAUER: Oh, my. Again, this is Barney Frank, whose nickname is the patron saint of the GSE. So I'm not sure that he is the most credible forecast cite here. Although, basically, Senator McCain was in constant touch with people on Capitol Hill today. He had Senator Reid calling for Senator McCain's involvement and really saying that no deal could pass unless Senator McCain was involved. Senator McCain took up that challenge, even to the point where he has decided to suspend the campaign and come back and roll up his sleeves and do his job and get this done.

He's invited Senator Obama to join him. This is a problem that, as he said, David, and you know, is not Republican or Democrat. It's facing 300 million Americans. We're at a crisis point. It needs to be resolved and it needs to be resolved before the markets open on Monday.

GREGORY: But Congressman Frank is saying that, in fact, it is getting resolved. There is a core of agreement with the White House and that it if going to pass in the coming days. What does Senator McCain know that Congressman Frank doesn't know, who is involved in the negotiations?

PFOTENHAUER: Well, I can't speak for what is inside Congressman Frank's head. What I can say is that Senator McCain-obviously, you don't make the decision to suspend your campaign and pull your ads off the air, David, and suspend your fund raising, lightly. Senator McCain believes that's what is required.

GREGORY: What does he know that Congressman Frank does not?

PFOTENHAUER: Well, what he's heard both from Republican and Democrats is that this will not-that a deal that will work for the American people will not get done without their leadership. And I would just cite that Senator Reid apparently disagreed with Barney Frank yesterday, because Senator Reid made constant references. And you saw it covered on ABC, on the Hill, where he was saying we need Senator McCain to get involved. This will not happen without Senator McCain.

And Senator McCain reached across and invited Senator Obama and said, we should both do this together. Let's work together for the American people. And let's suspend the politicking and do our job.

GREGORY: Yesterday, Senator McCain was questioned about the bill on the campaign trail. This is how he responded in terms of-the question was, what if it came down to his vote?

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: If the fate of the bill is in your hands, on your vote, could you and would you vote against it?

MCCAIN: Let me say that 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.

(END VIDEO CLIP)

GREGORY: So what happened between then and today when he decided his direct involvement would be determinative?

PFOTENHAUER: I think he met with his economic advisers today and then continued to have conversations with people on the Hill. And basically what was underscored was the fact there was going to be a massive fallout in the economy if this wasn't resolved quickly, and that the resolution did not seem to be in the offing, and that there was a real need-there was a leadership vacuum. There was a real need for bipartisanship or even non-partisanship, if you will.

And that's when Senator McCain took up the gauntlet and has gone forward with. He said, I will suspend-this is an act of tremendous political courage. He said I will suspend my campaign, 41 days out, in order to do the people's business. And that, frankly, is vintage John McCain. He's done that time and time again.

GREGORY: Nancy, finally, is he ruling out the possibility that he will go to the debate on Friday?

PFOTENHAUER: I think he would love to go to the debate on Friday. Remember, he's asked Senator Obama to meet with him in town halls probably 100 times. He's very happy to engage Senator Obama.

GREGORY: Is there still a chance he'll go?

PFOTENHAUER: If the deal is worked out, if the right resolution of this crisis is done in time, he will absolutely-he would be thrilled to be there. Certainly, debating Senator Obama on foreign policy is something that I'm sure he would enjoy.

GREGORY: If there is a deal, he'll be there. That advances the story. OK, Nancy Pfotenhauer, thank you very much. Appreciate you coming on this evening.

PFOTENHAUER: My pleasure.

GREGORY: Joining me now to weigh in on Senator McCain's decision, and some of what you've heard on the program tonight, the latest-and also to parse the latest numbers from our latest poll, the NBC News/"Wall Street Journal" poll, Michelle Bernard, president of the Independent Women's Forum, and an MSNBC political analyst, Richard Wolffe, "Newsweek's" senior White House correspondent, covers the Obama campaign, also an MSNBC political analyst, and Lawrence O'Donnell, also an MSNBC political analyst.

Michelle, I'll start with you. Quit reaction to what you've heard from Congressman Frank and now the McCain campaign.

MICHELLE BERNARD, MSNBC POLITICAL ANALYST: It has been a fascinating day. I can't tell who is on offense and who is on defense. This could be an absolutely brilliant strategic move by Senator McCain. Or it could be an enormous blunder with the American public thinking he has instituted or engaging in political gimmickry. I just don't know what is going to happen. Both sides are playing in it such an absolutely fascinating way.

Nancy is right, I have to say. This is something that was completely unexpected. It is typical maverick John McCain. But is it politics or is it really that McCain and Obama are absolutely necessary to resolving this issue?

GREGORY: Richard?

RICHARD WOLFFE, "NEWSWEEK MAGAZINE": Well, I think this is a new position for the McCain campaign. One of the characteristics we've seen from the start is different tactics on different days. For the AIG bailout, against it initially, sacking Chris Cox and then saying he is a good man. Initially, this was Obama's fault, the whole thing. Now, he wants to work with hill.

There is a different tactic a day coming from the McCain campaign. It keeps it lively, but what is the impression that people are getting out of it? Why today? What happened today, which was your question to Nancy. What was happening today? Was it the Stock Market? That didn't move a lot. Credit markets? Not really. What we saw, House Republicans taking on a Republican president. That's what happened today.

GREGORY: Lawrence O'Donnell, if the over-heated presidential campaign was not making it any easier to deal with the financial crisis, where you have a debate, and negotiations between the Hill and the White House, why not suspend? Why not try to lower the political temperature of the presidential campaign?

LAWRENCE O'DONNELL, MSNBC POLITICAL ANALYST: The only thing that was causing any difficulty in it at all was the Congressional campaign, not the presidential campaign. The presidential campaign has been, as Barney Frank said, irrelevant to the deliberations that the House and the Senate have on-going. Anyone who-I can tell you, David, having worked in the Senate myself that Barney Frank saw the McCain move as a stunt. And I can tell you that on both sides of the aisle, in the House and the Senate, it will be seen that way. I don't know how it is going to be seen publicly. Publicly, it may play well or it may have a quality of frantic behavior to it.

John McCain has no legislating role in this solution. He will not even be on the Conference Committee on this thing. And people who work there can tell you that that is where the action is. It's the chairman of the relevant committees. He is not one of them. So he really-the fascinating thing to me is going to be exactly what is the camera going to show John McCain doing in Washington on Thursday and Friday? I can't imagine what it is that will look to the public like he's making a major contribution to the solution.

GREGORY: All right. Got to take a break here. Coming next, inside the war room with strategists Mike Murphy and Bob Shrum. It is right after this break on RACE FOR THE WHITE HOUSE.

(COMMERCIAL BREAK)

GREGORY: Back now on THE RACE. Joining me now, two long-time campaign war room veterans, which does not mean they're old. It just means they're experienced. Democratic strategist Bob Shrum and Republican strategist and NBC News analyst Mike Murphy. OK, Mike, you're inside the war room in the McCain campaign and this idea comes up today. Good one or a bad one?

MIKE MURPHY, REPUBLICAN STRATEGIST: I would have been against it, but I don't think it was about politics. I think Barack Obama and John McCain had a conversation today about coming together in a bipartisan way, which is a good thing. Most important order of business, solving the financial crisis. I think McCain's motives are totally pure. Whether or not this is a good political tactic, I'm not so sure.

GREGORY: But he's made his bones in this campaign through these kind of tactical decisions, that maybe principled, but they also have some benefit politically.

MURPHY: If this one does. I think McCain's motives are totally pure. I think sometime the campaign is more driven by tactics and strategy, which could be a weakness. We'll see how this plays out. The American people get to decide, not us. I do think McCain mean it though. I don't doubt that for a minute. I don't think he sees it as a tactic.

GREGORY: Bob?

BOB SHRUM, DEMOCRATIC STRATEGIST: I think Mike is absolutely right in one sense. They don't have a strategy. They haven't had a strategy for a long time. They never laid down a positive predicate about why this guy should be president, how he would change the country. So they've had a campaign that moves from stunt to stunt, from a gas tax holiday to Sarah Palin, which got them two good weeks, to this, which I don't think is going to get them two good weeks. Because, quite honestly, when you listen to Obama say, a president has to be able to do more than one thing at a time. We should be able to deal with the economy and talk about foreign policy. And in 41 days, over 100 million Americans are going to decide who is going to be president. They have a right to hear us. I think people are going to think that's a pretty plausible case.

GREGORY: All right, let's go to our polls. They're very interesting. the head to head match-up in the new NBC News/"Wall Street Journal" poll, dead heat. It has Obama/Biden 46, McCain/Palin 45. Mike, do you think the race is still this close? Other polls have it as a higher spread. Ours though has been consistent, still tight.

MURPHY: I think there has been a little bit of a move to Obama, but I think it is still a very competitive race. I believe it's essentially tied. I'm more interested in the state by state polls. There has been a bit of a move to Obama this week. But 41 days is a long time in politics.

GREGORY: Bob, how do you see it?

SHRUM: Mike tries. He tries so hard. Look, I do not believe there is a chance in the world the McCain campaign would have done what they did today if they thought this was a one-point race. Sarah Palin they picked because they knew they were headed down the road to defeat. They had to get out of the way they were doing it. They had to do something to break through. That's what they're doing here again today.

GREGORY: Let's put up the most important issues in the campaign, according to our voters in this poll: 57 percent say economic issues, job losses, foreclosures, energy; 17 percent say domestic issues like health care, education and the environment; just 15 percent say foreign policy issues, Iraq, Russia, war on terror; 10 percent say social issues. Mike, Rove '04, if the conversation is about the war on terror, Bush wins. In '08, if it stays on the economy, it has to help Obama.

MURPHY: Economic pain is Democratic territory, which is why the McCain campaign is trying to get into the economic business, but for the right reasons. We're in crisis right now and McCain is a leader. And for the political reason that it is the issue people care about. Barack Obama is vulnerable on the economy, liberalism, lack of experience. But the debate-we have to get this plan done first in a bipartisan manner. Then we can have the ideological fight, where McCain has some advantages.

GREGORY: We'll get to that. Who is better on the issues? If you tick through those, improving the economy, Obama 46, McCain 34. Handling the Wall Street crisis, Obama 35, McCain, 30. Not a huge difference there because there is not a huge difference between them on the issues of how to handle it. Handling the situation in Iraq, McCain 47, Obama 38. Bob, if I'm John McCain, don't I want this debate Friday night? I want to talk about foreign affairs in the middle of all this.

SHRUM: A very dangerous debate for him, because in 1960 when Kennedy ran against Nixon on the slogan, experience counts. They went into that debate. People watched Kennedy. They watched Nixon. They said, yes, Nixon has more experience, but Kennedy has enough. And I think what is going to happen in this debate, if it is held, is Obama is going to pass the threshold on national security, foreign policy. People are going to decide that he can handle it. He is going to hold the high ground on the economy. Throwing around the word liberal isn't going to do him in. He's going to be the next president.

GREGORY: From both of you, predictions, does the debate happen Friday?

MURPHY: I think it will now. It is going forward. I think enough will happen on the negotiation for the bill that if John McCain is able to, he'll do the debate. I think he does want a debate. A foreign policy debate-Bob is wrong on this-is good for John McCain.

SHRUM: If it doesn't, John McCain will be the first Republican ever to figure out how to lose the state of Mississippi.

MURPHY: Never going to happen.

GREGORY: Not going to happen. We're going to leave it there. Mike Murphy, Bob Shrum, thanks as always. Really appreciate you both being here. As McCain suspends his presidential campaign, President Bush is coming back into the spotlight, preparing to address the nation tonight in prime time in the middle of all of this to shore up public support for the bailout plan. I'll go one-on-one with his former Press Secretary Ari Fleischer. I used to do this a bit in the past. Coming up right after this.

(COMMERCIAL BREAK)

GREGORY: Back now on RACE FOR THE WHITE HOUSE. President Bush will address the nation tonight in another appeal for support for the bailout plan. Joining me now is Ari Fleischer, former White House Press Secretary to George W. Bush, to President Bush. Ari, it's good to see you. I say we've gone one-on-one a few times before tonight.

ARI FLEISCHER, FMR. WHITE HOUSE PRESS SECRETARY: We always used to, didn't we? You're taller than me. You always won.

GREGORY: I don't think so. Let me read a little news to you, Ari. This is from our political director, Chuck Todd, from a senior McCain adviser: "if there is no deal before the debate is scheduled, they," meaning the McCain folks, "are staying in Washington, period. That said, they're committed to having the first debate in Oxford, Mississippi, and committed to having all the debates in the cities as planned, even adding a town hall or two if Obama wants to do that as well."

You heard from Senator Obama today, Ari, who said, look, a president has to be able to multi-task, has to do be able to do more than one thing at once. Is this a good call? I know you're a supporter of McCain. But I'm asking you to think about this more analytically, as someone who has been in these positions in a high stakes campaign.

FLEISCHER: One of the joys of being out is I do support John, but I don't have a stake in it other than who I support. I don't work for anybody. I will tell you this. If this is the calamity that everybody tells us it really is, then it does occur to me, both on substance and politics, it is the right move for John McCain to get back to Washington. Even though he is not going to be on the committee that makes something happen, the fact is if he tells Republican to be against this, it won't pass. If he tell them to get with it, it has a very good chance of passing.

The fact that he is in the mix, right in the middle of it is a good thing for him, because the economy is something he has to take head on and address.

GREGORY: Well, that's a question. How much control does he really have over the Republicans here? Yes, if he says don't vote for this, he may have a willing audience there. The truth is he's been out their last few days saying, there is really not a no option here in this bill. And yet there is a lot of conservatives on Capitol Hill who say, no, no, we're not doing this. There's a huge ideological and philosophical split. There is not the kind of leverage-the president doesn't have the kind of leverage that he might have had earlier in his presidency.

FLEISCHER: David, that's right. That's why the return of John McCain can to Washington can actually be instrumental in getting this passed. A lot of the room for rebellion will come from the conservative free market right. And John McCain is not exactly one of those people, but he does have the ability as the standard bearer of the party this cycle to influence those people in what could be, we don't know, a close vote. That's why he does have a significant role. I think that's fair to say, even though he won't write the legislation. He does have a significant role to play.

If this is calamity that they're telling us, where we're on the verge of bank runs, then all hands should be on deck.

GREGORY: The question is, again, from a political point of view-and obviously, politics plays a role here, because it will work to his benefit potentially or be a little too risky and not help him if it is seen otherwise. But from the point of view of substance, and moving forward in this campaign, if you're John McCain and you're advising him, don't you want him to have a debate about foreign policy and international affairs when that's his strength right now?

FLEISCHER: I think not this week. If that debate is on foreign policy Friday night, it's almost like you turn into the Super Bowl and you watch a soccer match. Everybody is talking economics right now. To all of a sudden switch one Friday night to foreign policy-what it really means is foreign policy is lost as a debating point in this campaign. It will be a one-night event and then the next day everybody is right back to talking about the economy.

I prefer to switch the topic of the debate, if it occurs on Friday, and debate the economy.

GREGORY: You heard from Mike Murphy just a moment ago, who you remember well. He was on the other side in 2000. He was running the McCain campaign. He made the observation that this decision and decisions by the McCain of the last couple week smacks more of a tactical approach to the campaign rather than a strategic one. Do you agree with that? What is the impact of that, ultimately?

FLEISCHER: I think John McCain's strategy is much more resolved around his persona than issues and policy. That's his strategy. He has experience. He has judgment. He is a POW, not that he says that so overtly. But he has been there and seen what it takes to get things done. He's a maverick and knows how to reform the system. That's a much more individual type candidacy than a Ronald Reagan style, ideological candidacy. So there is a strategy there. There are also a series of tactics. Campaigns are always about tactics.

GREGORY: Is he a different guy than you campaigned against in 2000?

FLEISCHER: He is, David. I think in 2000, John McCain was pure 100 percent maverick. I think the same thing would have happened to John McCain had he beaten George Bush in 2000. John McCain, just by the weight of being the nominee, recalibrate who he is on some issues. The one issue, frankly, John McCain used to be against was tax cuts that President Bush passed and a bipartisan Congress supported. He said they were tax cuts for the rich. Now he's for them.

He has calibrated on some levels. At his heart, the man still takes on the Republican establishment. He is a maverick. He is still a fighter pilot who largely does things to his own unconventional tune. That is the real John McCain.

GREGORY: All right. Ari Fleischer in New York tonight. Thanks very much, Ari. Good to see you.

FLEISCHER: David, great to be with you.

GREGORY: That will do it for the program for tonight. Tonight, the president addresses the nation, as we've been saying, at 9:00 p.m. Eastern time to discuss the Wall Street bailout plan. We will carry it live here on MSNBC. I'll join you for a portion of that coverage tonight. I'm David Gregory in Washington. See you a little later on. "HARDBALL" with Chris Matthews coming up next.

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

END

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