updated 9/25/2008 6:02:12 PM ET 2008-09-25T22:02:12

THE RACHEL MADDOW SHOW

September 24, 2008

THIS IS A RUSH TRANSCRIPT.

THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED

Guests: David Gregory, Chris Matthews, Chris Dodd, Cliff Stearns, Matt Welch

RACHEL MADDOW, HOST: I'm sure if he knew you were calling him my guest, he would reconsider. Thank you, Keith. I really appreciate it.

Good evening. This is MSNBC's special coverage of tonight's presidential address. President Bush is scheduled to speak about the country's economic crisis shortly.

Earlier this evening, the president telephoned Senator Obama to invite him to a bipartisan congressional meeting on the bailout. Senator Obama accepted and will be in Washington for that meeting. Just a few minutes ago, senators, McCain and Obama, released a joint statement urging congressional unity to pass a bailout bill and to avoid, quote, "economic catastrophe."

Joining us now is David Gregory, NBC's chief White House correspondent and host of MSNBC's "RACE FOR THE WHITE HOUSE."

David, thanks for joining us.

DAVID GREGORY, NBC NEWS CHIEF WHITE HOUSE CORRESPONDENT: Sure.

MADDOW: We just got about a minute before the president speaks. Can you tell us a little bit about the timing? Why is the president giving this speech tonight?

GREGORY: Well, I think, he wants to bring the power of the office to bear here as these negotiations move forward. The president, like everyone else, has been watching the kind of reaction this bailout plan has gotten in Congress, a lot of angry reaction from both Democrats and Republicans. Negotiations are moving forward. Negotiators say they're actually getting close to a deal.

The president tonight, I'm told, will talk about the stakes, will talk about a meeting that he is going to convene tomorrow that will include senators Obama and McCain, and both parties and their congressional leadership, to talk about moving the bill forward. He also wants to tell taxpayers he knows it's a hefty price tag, there's a lot on the line, but there is some soundness in the economy is what he'll tell the American people. And it's bailout that must move forward, Rachel.

MADDOW: David Gregory, thanks for joining us. We'll be talking to you later.

And now, here's the president.

PRES. GEORGE W. BUSH, UNITED STATES OF AMERICA: For America's economy. Over the past few weeks, many Americans have felt anxiety about their finances and their future. I understand their worry and their frustration. We've seen triple-digit swings in the stock market. Major financial institutions have teetered on the edge of collapse, and some have failed.

As uncertainty has grown, many banks have restricted lending, credit markets have frozen and families and business have found it harder to borrow money. We're in the midst of a serious financial crisis and the federal government is responding with decisive action. We boosted confidence in money market mutual funds and acted to prevent major investors from intentionally-driving down stocks for their own personal gain.

Most importantly, my administration is working with Congress to address the root cause behind much of the instability in our markets. Financial assets related to home mortgages lost value during the housing decline, and the banks holding these assets have restricted credit. As a result, our entire economy is in danger.

So I propose that the federal government reduce the risk posed by these troubled assets and supply urgently-needed money so banks and other financial institutions can avoid collapse and resume lending. This rescue effort is not aimed at preserving any individual company or industry. It is aimed at preserving America's overall economy. It will help American consumers and businesses get credit to meet their daily needs and create jobs. And it will help send a signal to markets around the world that America's financial system is back on track.

I know many Americans have questions tonight. How did we reach this point in our economy? How will the solution I propose work? And what does this mean for your financial future? These are good questions, and they deserve clear answers.

First, how did our economy reach this point? Well, most economists agree that the problems we are witnessing today developed over a long period of time. For more than a decade, a massive amount of money flowed into the United States from investors abroad because our country is an attractive and secure place to do business. This large influx of money to U.S. banks and financial institutions, along with low interest rates, made it easier for Americans to get credit.

These developments allowed more families to borrow money for cars and homes and college tuition, some for the first time. They allowed more entrepreneurs to get loans to start new businesses and create jobs.

Unfortunately, there were also some serious negative consequences, particularly in the housing market. Easy credit combined with the faulty assumption that home values would continue to rise led to excesses and bad decisions. Many mortgage lenders approve d loans for borrowers without carefully examining their ability to pay. Many borrowers took out loans larger than they could afford, assuming that they could sell or refinance their homes at a higher price later on.

Optimism about housing values also led to a boom in home construction. Eventually, the number of new houses exceeded the number of people willing to buy them, and with supply exceeding demand, housing prices fell, and this created a problem. Borrowers with adjustable rate mortgages who had been planning to sell or refinance their homes at a higher price were stuck with homes worth less than expected, along with mortgage payments they could not afford.

As a result, many mortgage holders began to default. These widespread defaults had effects far beyond the housing market.

See, in today's home industry, home loans are often packaged together and converted into financial products called "mortgage-backed securities." These securities were sold to investors around the world. Many investors assumed the securities were trustworthy and asked few questions about their actually value.

Two of the leading purchasers of mortgage-backed securities were Fannie Mae and Freddie Mac. Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk.

The decline in the housing market set off a domino effect across our economy. When home values declined, borrowers defaulted on their mortgages, and investors holding mortgage-backed securities began to incur serious losses. Before long, the securities became so unreliable that they were not being bought or sold.

Investments banks such as Bear Stearns and Lehman Brothers found themselves saddled with large amounts of assets they could not sell. They ran out of money needed to meet their immediate obligations and they faced imminent collapse. Other banks found themselves in severe financial trouble. These banks began holding on to their money and lending dried up, and the gears of the American financial system began grinding to a halt.

With the situation becoming more precarious by the day, I faced a choice, to step in with dramatic government action or to stand back and allow the irresponsible actions of some to undermine the financial security of all. I'm a strong believer in free enterprise. So my natural instinct is to oppose government intervention. I believe companies that make bad decisions should be allowed to go out of business.

Under normal circumstances I would have followed this course. But these are not normal circumstances. The market is not functioning properly. There's been a widespread loss of confidence, and major sectors of America's financial system are at risk of shutting down.

The government's top economic experts warned that without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold. More banks could fail, including some in your community. The stock market would drop even more which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically.

And if you owned a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors and millions of Americans could lose their jobs. Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And ultimately, our country could experience a long and painful recession.

Fellow citizens, we must not let this happen. I appreciate the work of leaders of both parties in both Houses of Congress to address this problem and to make improvements to the proposal my administration sent to them. There is a spirit of cooperation between Democrats and Republicans, and between Congress and this administration.

In that spirit, I've invited senators McCain and Obama to join congressional leaders of both parties at the White House tomorrow to help speed our discussions toward a bipartisan bill. I know that an economic rescue package will present a tough vote for many members of Congress. It is difficult to pass a bill that commits so much of the taxpayers' hard-earned money.

I also understand the frustration of responsible Americans who pay their mortgages on time, file their tax returns every April 15th, and are reluctant to pay the cost of excesses on Wall Street.

But given the situation we are facing, not passing a bill now would cost these Americans much more later. Many Americans are asking how would a rescue plan work.

After much discussion, there's now widespread agreement on the principle such a plan would include. It would remove the risk posed by the troubled assets, including mortgage-backed securities now clogging the financial system. This would free banks to resume the flow of credit to American families and businesses.

Any rescue plan should also be designed to ensure that taxpayers are protected. It should welcome the participation of financial institutions, large and small. It should make certain that failed executives do not receive a windfall from your tax dollars. It should establish a bipartisan board to oversee the plan's implementation, and it should be enacted as soon as possible.

In close consultation with Treasury Secretary Hank Paulson, Federal Reserve Chairman Ben Bernanke, and SEC Chairman Chris Cox, I announced a plan on Friday.

First, the plan is big enough to solve a serious problem. Under our proposal the federal government would put up to $700 billion taxpayer dollars on the line to purchase troubled assets that are clogging the financial system. In a short term, this will free up banks to resume the flow of credit to American families and businesses. And this will help our economy grow.

Second, as markets have lost confidence in mortgage-backed securities, their prices have dropped sharply. Yet the value of many of these assets will likely be higher than their current price because the vast majority of Americans will ultimately pay off their mortgages. The government is the one institution with the patience and resources to buy these assets at their current low prices and hold them until markets return to normal. And when that happens, money will flow back to the treasury as these assets are sold, and we expect that much, if not all, of the tax dollars we invest will be paid back.

The finally question is: What does this mean for your economic future? Well, the primary steps-the purpose of the steps I've outlined tonight is to safeguard the financial security of American workers, and families, and small businesses.

The federal government also continues to enforce laws and regulations protecting your money. The Treasury Department recently offered government insurance for money market mutual funds. And through the FDIC, every savings account, checking account, and certificate of deposit, is insured by the federal government for up to $100,000. The FDIC has been in existence for 75 years, and no one has ever lost a penny on an insured deposit, and this will not change.

Once this crisis is resolved, there will be time to update or financial regulatory structures. Our 21st century global economy remains regulated largely by outdated 20th century laws. Recently, we've seen how one company can grow so large that its failure jeopardizes the entire financial system.

Earlier this year, Secretary Paulson proposed a blueprint that would modernize our financial regulations. For example, the Federal Reserve would be authorized to take a closer look at the operations of companies across the financial spectrum and ensure that their practices do not threaten overall financial stability.

There are other good ideas, and members of Congress should consider them. As they do, they must ensure that efforts to regulate Wall Street do not end up hampering our economy's ability to grow. In the long run, Americans have good reason to be confident in our economic strength.

Despite corrections in the marketplace and instances of abuse, Democratic capitalism is the best system ever devised. It has unleashed the talents and productivity and entrepreneurial spirit of our citizens. It has made our country the best place in the world to invest and do business, and it gives our economy the flexibility and resilience to absorb shocks, adjust, and bounce back.

Our economy is facing a moment of great challenge, but we've overcome tough challenges before, and we will overcome this one. I know that Americans sometimes get discouraged by the tone in Washington and a seemingly endless partisan struggles. Yet, history has shown that in times of real trial, elected officials rise to the occasion.

And together we will show the world once again what kind of country America is. A nation that tackles problems head on, where leaders come together to meet great tests, and where people of every background can work hard, develop their talents, and realize their dreams.

Thank you for listening. May God bless you.

MADDOW: That was President Bush speaking from the east room of the White House. That was his 35th address to the nation. Tonight, his focus was the economic crisis facing the country and his administration's proposed $700 billion bailout plan.

The president said the U.S. is in the midst a serious financial crisis, that the market is not working properly. Of the plan, he said there is quote, "widespread agreement on the principles of a deal." He described areas of widespread agreement is including need to remove the risks posed by bad assets, the need to protect taxpayers, the need for large and small institutions to be able to participate in the bailout. He described the need to prevent any failed executives from getting some sort of windfall out of the bailout plan. And he described the need for a bipartisan board to oversee implementation of the plan.

That last point, in particular, a point of evolution for his administration after his administration officials had resisted that earlier in week.

Joining us now is Senator Chris Dodd, a Democrat from Connecticut. He is the chairman of the Senate Banking Committee.

Senator Dodd, thank you for your time. I'm very happy that you are very busy these days.

SEN. CHRIS DODD, (D) CHAIRMAN, SENATE BANKING COMMITTEE: Yes, I'm getting very tired, too. It's been a long five days.

MADDOW: And I think it's probably going to be a long few more days.

DODD: Yes, you are, you're absolutely right.

MADDOW: And let me ask you first about the way the president described the current crisis tonight. Do you agree with the president about why this crisis happened and with what the contours of the crisis are?

DODD: Well, I-the president identified correctly is the foreclose crisis, the housing crisis. What the president left out-we don't need to dwell on this because we've got to look ahead, but the president left out is the cops were on a beat and we had plenty of regulation in the area, the question was the regulators weren't doing their jobs, that was to go out and prohibit deceptive and fraudulent lending practices.

Remember, the "Wall Street Journal" pointed out that 65 percent of the subprime mortgages that were worked out or extended actually qualified for prime mortgages a lot less costly than they had to be. So, this was unscrupulous behavior, bad behavior that went unchecked for far too long.

And secondly, and talking about Fannie Mae and Freddie Mac, and clearly we need changes there. But Fannie Mae and Freddie Mac bought very few of these subprime mortgages. So, the problem of going from subprime mortgages, predatory lending, to the situation we're in, is a bit different.

But, look, there's no point tonight. We need to think ahead. Can we revolve this matter and (ph) put our country back on right track? And there'll be plenty of time to go back and do the autopsy on how we ended up at this very tragic and sad moment when an administration for eight years, in my view, didn't do their job. But now, we need to say-what do we need to do in order to get a program in place to allow for our country and our economy to recover.

MADDOW: Well, let me connect those two ideas.

If the president did address the issue of regulation-what you described as the cops not being on the beat-he's essentially said there shouldn't be any update in the regulation now. We should deal with that after the bailout, when you're considering this in the Senate, when Congress is considering his bailout plan, are you considering the effort to force the issue of reregulating Wall Street into this bailout plan, or are you willing to consider it as a separate matter?

DODD: Well, probably, it has to be done in a larger sense as a separate matter only because it's so complex it will take a while. But there are things like the predatory lending bill, which we've drafted and marked up in the past, ought to be a part of something like this. I doubt we can get that, but clearly, that needs to be done. The Federal Reserve Bank has promoted several regulations in this area which are helpful, but it's a little like closing the barn door long after the problem has escaped.

So, there's some things we can do, but the majority will have to be focused on taxpayer protection, accountability in this bill, seeing to it that homeowners and foreclose issues are going to be addressed, and dealing with executive compensation. I was pleased to hear the president, at least, identify those broad areas. Earlier this week, of course, none of those matters were included in the proposal he sent to the Congress. That's a quantum leap forward, that will help, I think.

MADDOW: Because he's made those leaps forward, can you predict now that the bailout plan will pass the Congress? Do you think a plan will pass?

DODD: Well, I hope it will-some plan will pass. But candidly, turning over $700 billion when we're going to have a change of administration in 40 days basically, is something-I'd like to see something done with this money that would require some check on this, to determine whether or not this plan of his is working. I've talked to a lot of people on Wall Street who spent their careers there who have serious reservations about this particular proposal.

Now, Congress ought not try to micromanage that, but I'm not convinced this plan is going to work and a lot of people who are far more knowledgeable about the workings of these financial institutions are not either. So, I'd like to be able to have some point here, fairly quickly, to make determinations to whether or not this proposal, if he's given the authority, will actually work.

MADDOW: On the issue of the prospects for this bailout. Senator McCain today in suspending his presidential campaign and saying that he wanted to return to Washington-although we understand he's still in New York City tonight-he said, "I do not believe that the plan on the table will pass as it currently stands and we are running out of time." When he says we are running out of time, do you agree with him and do you think there is a call for him to ask for a suspension of the presidential campaign and a delay of the debate?

DODD: Well, you know-look, I'd like to move quickly if we can on this as well. Rachel, I'll tell you, speed is not issue here, getting this right. This is the kind of decision, if not made well, made in a smart way and a pragmatic and thoughtful way, could haunt us for decades to come.

So, I'm as anxious as anyone to get this done, but I'm not about to move this thing more quickly than I think is warranted, and I want to make sure to the extent you can, that we're doing the right thing.

Now, I'm delighted that John is expressing himself on the issue. I've heard from Barack Obama on numerous occasions over the last number of days calling-I know he's talked to Hank Paulson, and so he's been deeply involved and interested in how this is progressing. I've never heard from John McCain on the issue.

So, I'm delighted he's expressing some interest and I'm a little concerned that while we're meeting -- in fact, tomorrow morning at 10:00 a.m., Republicans and Democrat in the House and in the Senate are sitting down to try and finalize some of these particular points, we had a long meeting today in the Democratic caucus in the Senate-and I'm just worried a little bit that sort of politicizing this problem, sort of, you know, flying in here, I'm beginning to think this is more about a rescue plan for John McCain rather than a rescue plan for the economy.

So, we're going to meet tomorrow, apparently, at the White House late in the afternoon, but candidly, a lot of us have been working for five straight days, around the clock, and I haven't heard a word from John McCain.

MADDOW: Senator Dodd, we're just hearing that your colleague, your cohort, I guess, in the House, Barney Frank, the head of the House Financial Committee, has just said that this plan will pass presumably speaking for himself in the House. Is there a unified Democratic position on this plan? We know there's been a lot of dissent and division within the Republican Party on the bailout issue. Are Democrats united?

DODD: Well, like I said, we met today and in the plan that I proposed back several days ago has been universally-endorsed by my Democratic colleagues, and it incorporates a lot of the principles, Rachel, we talked about here tonight. That is taxpayer protection, dealing with homeownership, the foreclosure issue, as well as accountability.

And it's very important to point out here as well, beyond these issues, the American people want to know-what does this mean to me? I understand you're going to boy a lot of bad assets on Wall Street but what about retirement plans, 401(k)s, these whole issues of job creation, obviously, college tuitions-all of these issue es as well are at stake.

And if these problems are as serious as they are, that we ought to move forward, but I'm not about to move forward with a plan that I don't think is going to do the job or is going to give far too much power and resources to an administration that hasn't demonstrated yet to me they know what to do with it.

MADDOW: Senator Chris Dodd, chairman of the Senate Banking Committee, thank you so much for joining us tonight. We really appreciate it.

DODD: Thank you, Rachel.

MADDOW: Joining us now from Washington, as well, is Republican congressman from Florida, Cliff Stearns.

Congressman Stearns, thank you so much for joining us tonight.

REP. CLIFF STEARNS, ® FLORIDA: Oh, I'm glad to be here, Rachel.

MADDOW: We just heard the president's speech. We just heard a response from the chairman of the Senate Banking Committee, from Senator Dodd. You have voiced opposition to this bailout. In fact, you've been quoted in one of your home state newspapers calling the plan, quote, "an assault on capitalism." Did the president do anything tonight to convince you to sign on to this proposal?

STEARNS: Well, I think the president did a very good job and I applaud him for speaking to the American people. I just wish he would have spoken to the American people before the three-page plan that Secretary Paulson brought before members of the Congress and the House. That plan had obviously changed and it's a commendation to Senator Dodd that he has changed that plan.

Senator (ph) Paulson asked us to approve that three-page plan, exactly 2 ½ pages, in 24 hours. It was giving him complete authority to spend $700 billion. And this is after we had already spent $315 billion for Freddie Mac, Fannie Mae, AIG, and Bear Stearns. And they said there'd be no more problems and yet bailout after bailout is not a strategy, and ultimately, is not sustainable for financial cures here in America.

And so, I think, we have to be careful of taking Secretary Paulson's plan in complete, literally, as he suggested. So I'm very glad the president has changed the plan with his presentation tonight, because he's talking about accountability, he's talking about changing the regulations, and also making sure that the CEOs do not benefit once Secretary Paulson comes in and takes all these bad debts out.

So I think there is a mood, sense here in Congress that perhaps Paulson's bill will be changed and we'll have the opportunity, Rachel, as members of Congress in the Senate and in the House, to deliberate on this as a constitutional responsibility for the elected people that we represent.

And so I think, we're moving in a bipartisan fashion to try and calm the markets and I think if the Secretary Paulson would be patient and also Speaker Pelosi and the Majority Leader Reid would keep Congress in session, and deliberate and have the hearings and flush this whole bill out, think we'll be better off than just bailout after bailout strategy.

MADDOW: Are you opposed to bailouts in general if those sorts of caveats and strings you're describing, the sorts of conditions and explanations were involved in this bailout, could you imagine it getting to a place where you would support, are you going to be against it to the end sort of no matter what's in the bill?

STEARNS: No, I'm not going to be against it towards the end. But, Rachel, I was involved with the S&L crisis. We set up the Resolution Trust Corporation and that corporation was separate from the administration, separate from Congress, and it deliberated in a fashion to look at all the bad loans and the S&Ls in such a way that it was fair and unpolitical.

Now, the administration is taking this whole thing on themselves with Secretary Paulson. I would like to see something like the Resolution Trust Corporation that was set up for the S&L so it's outside the administration, outside of Congress, and it's deliberated by people that are extremely knowledgeable.

Now, you have to remember, Secretary Paulson came from Goldman Sachs, and that's a corporation of about $80 billion in revenues. And he's taking on a corporation of 10 times that size with complete carte blanche authority. And I don't think the American taxpayers are willing to give one man the responsibility to hire and fire without any kind of supervision.

So, I'm glad to hear the president's talking about some accountability, but I would like to see something like a Resolution Trust Corporation that works so successfully for the S&L crisis instead of just one man being responsible for this whole thing.

MADDOW: Congressman Cliff Stearns of Florida. Thank you very much for joining us tonight. We appreciate your taking the time.

STEARNS: All right. Thank you, Rachel.

MADDOW: Sometimes, you can tell the size of a political issue by finding how strange the bedfellows are who are on one side of it. (INAUDIBLE) we get Chris Dodd and Cliff Stearns both telling us many of the same things about their concerns about this proposed bailout.

Rejoining us now from our Washington bureau is David Gregory, NBC's chief White House correspondent and host of MSNBC's "RACE FOR THE WHITE HOUSE."

David, your initial impressions overall of the speech, do you think that President Bush made more of a case than he has been making, than his administration has been making thus far this week for the bailout?

GREGORY: Yes. Well, I think he personally is making more of a case than he has made. This is about a sales pitch at this point. And I think that there was a feeling in the White House that chairman of the Federal Reserve, Ben Bernanke, and the Treasury secretary, Hank Paulson, came up a little short on Capitol Hill in making the argument that this was vital, that it had to happen this week, and that the cost of inaction was greater than the cost of $700 billion for a bailout here.

Our poll today, NBC News/"Wall Street Journal" indicated that some 28 percent of voters hadn't made an opinion yet about the bailout. That's a big number to try to persuade. It also is an indication of just how difficult this issue is to get your head around. I've seen a lot of primetime addresses by this president on a lot of big important issues. It's striking to hear the president try to explain mortgage-backed securities in primetime as a central component of what's going wrong with the economy.

But there's also an effort here, in fairness, to try to argue with a taxpayer that, no, we're really going to try to get you some fairness out of all this when there is no fairness. The reality is that a lot of money was lost because a lot of big debts were made and did not pay off, and now, the taxpayers are being asked to pay a whole lot of money, and to buy all this bad debt from Wall Street at a higher price than it's worth and the president's trying to make that case.

It's a tough case to make and that's the reaction that Paulson and Bernanke got on Capitol Hill which is why you hear Chairman Dodd and Congressman Barney Frank as well saying, "Look, we've got to have some protection for taxpayers, some return on investment potentially, some oversight over Hank Paulson and over the administration, generally." And it's also, why, Rachel, they want to get-the president does-and McCain and Obama, and the congressional leadership together to try to steam roll this a little bit, fast track some of these negotiations, and get some political buy on it.

It's striking that the president says, this is not-he talked a little bit about how did we get here because people want to know that, but just a couple of days ago he said, "No, our focus should be on moving forward," but the presidential campaign is largely about: How did we get here?

MADDOW: And I'm struck by the distance between the presidential campaign discussion of this issue and what's happening on Capitol Hill, including what the president said tonight. On the campaign trail, this very much about regulation-who's a re-regulator, who's a deregulator, what's John McCain's record on regulation?

GREGORY: Yes.

MADDOW: Barack Obama's early call on the campaign, as early as about a year ago when he first gave that speech at NASDAQ talking about regulation. Also today, John McCain is saying that we're running out of time, that's why urgently, the debate needs to be postponed; the presidential campaign needs to be suspended.

You're hearing both from left and right, both from Chris Dodd, and even from Cliff Stearns of Florida, the Republican congressman from Florida, very conservative, saying-you know what? This isn't a matter of rushing. We don't need more time. We don't need to steam roll through here.

And it seems that both sides are very happy to put off the regulation issue until after the bailout is settled. It seems like there's two different debates happening here that aren't all that connected.

GREGORY: Well, because three's an immediate need for confidence in the markets and that is a belief that shared in the bipartisan way. Now, how you get there is what is the big subject of debate. And so that's why there's this immediate need for money. How much is the big debate is worth? Chuck Schumer has said, "How about $150 billion? Why don't we start with that and see how that works through the market, see however about responds."

But I do think that there's going to be separate pieces to this. There will be time to look at how this all came to be. That will be for the presidential debate as it moves forward. But the feeling is that there has to be an initial infusion of cash to get the credit markets open again.

There seems to be some bipartisan agreement about that, but again the devil is in the details here because it's a question of oversight, turning over so much money so quickly. There's a lot of Democrats whose feel that the White House is rushing them through this in the way that they felt they had the authorization for the war in Iraq put on their plate and said, "You've got to pass this right now."

And they have said, "Look, these issues are not new. They've been around for about a year and a half and the same people who are asking for the money, said it was contained at various points throughout this crisis." So there's a big blame game here but at the bottom of all of this and the president - the case he was making tonight is there's not a lot of time for action. There's an urgent need here that the economy needs that the credit markets need. And that's why I think there has been an ability on both sides to work through some of these issues and they're getting closer to a deal.

Barney Frank says it could be a matter of days before they have a deal and it doesn't sound like Chris Dodd is says they're much farther off than that either.

MADDOW: David Gregory, NBC's chief White House correspondent - thanks.

Nice to see you, David.

GREGORY: Sure, good to see you Rachel.

MADDOW: So the president has said our entire economy is in danger and the deal-making continues tonight. What doesn't continue apparently is the John McCain campaign for the presidency. At least on the face of it. At least for now. Selfless leadership, bold political stroke? Both? Neither? We'll ask the host of "Hard Ball," Chris Matthews, all about it, next.

(COMMERCIAL BREAK)

MADDOW: Sen. McCain has suspended his presidential campaign and is let threatening to skip Friday's presidential debate to work on the Wall Street bailout bill. Is this a self-sacrificing manifestation of his "country first" program? A self-aggrandizing political move to try to take the reins of leadership on economy from Barack Obama? Both? Neither?

No matter where you come down on it, today's dramatic action appears to be another tile in the McCain campaign mosaic of over-the-top reactions to lots and lots of different situations. When Russia was invading Georgia, McCain rushed in, "We're all Georgians, let's rumble with Russia."

As Hurricane Gustav bored down on New Orleans, he partially canceled the Republican convention. When Barack Obama fared well at his convention, McCain's response was to throw the ultimate Hail Mary pass and choose Sarah Palin, an inexperienced governor, even though his entire campaign was built around criticizing his opponent's inexperience.

Economy in chaos? Wall Street in turmoil? McCain now says, "Let's fire the chairman of the SEC," in the middle of the crisis. And now that there's a big proposed Wall Street bailout plan, McCain has out-Hail Maryed himself. Suspend the campaigns, postpone the debate. This crisis-first pattern may be what this week moved conservative columnist George Will to question Sen. McCain's temperament and judgment.

While the financial crisis is undoubtedly grave, the only real change in affairs since yesterday, since two days ago is the new information that his poll numbers are being driven by concerns over the economy to heretofore unseen lows.

New polls out today show John McCain trailing Obama in Iowa, New Hampshire, Michigan, Ohio, and Pennsylvania. So is that the strategy here, try to use an economic crisis as an excuse to hit the reset button to take a time-out from the campaign because the campaign is going poorly? Send out a talking-points memo about how to campaign volunteers about how to campaign on having suspended your campaign?

Yes there are talking points about the campaign's suspension, presumably mistakenly E-mailed to reporters by a McCain spokesperson today. So what to make of all this drama?

For his part, Sen. Obama pushed back hard on the suggestion from John McCain that they ought to delay the debate.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: 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. And I think that it is going to be part of the president's job to deal with more than one thing at once.

(END VIDEO CLIP)

MADDOW: Your move, Sen. McCain.

Joining us now is the host of MSNBC's "HARDBALL," my colleague Chris Matthews. Chris, thanks for being here.

CHRIS MATHEWS, HOST, "HARDBALL": Hi. Hi, Rachel. It's hard to match what you said, by the way. I'm supposed to offer commentary but I agree with everything you say. I think that you missed preamble to this whole thing tonight. It is President Bush. You know, sometimes we see when we don't want to an appeal of the parliamentary system where a government which has failed is no longer the government. We have a presidential system is which is on the clock. You know, the president serves out his tour of duty regardless of his political effectiveness. And there, you saw the president almost - what was it like a flashback. It was like, "Is this the present?" Is he still president? Is he somebody playing him on "Saturday Night Live" we're watching?

It didn't seem right tonight. It didn't seem right at all. The words he used, Rachel - I don't know if they jumped out at you, but if you're waiting for scare words, "serious financial crisis, panic, rescue, serious recession." These words just - presidents don't usually use words like that because they rattle people, especially older voters, "What did he just say? Did he say panic? Did he just say rescue? Did he say recession?"

You wonder if people are running to their ATM machines right now and making plans to go to the bank and withdraw the cash tomorrow. I mean, it's a very - I feel a very kind of difficult speech for people to hear tonight.

MADDOW: I was struck by some of the - maybe they're coincidences. But it's been, I think, 377 days since Bush gave a primetime address.

MATTHEWS: Yes.

MADDOW: The last one - the last time he gave one was on the war in Iraq. The last time that Dick Cheney was on Capitol Hill lobbying Congress was you the war in Iraq. We had Joe Biden today speaking in Cincinnati where Bush gave his essentially the declaration that he was going to invade Iraq, speaking on foreign policy there.

Were talking about $700 billion. The only other thing in our budget that reaches that level that we can think about is the bill for the war in Iraq. I wonder if what's happening here is we're defining this as something that is as big a crisis for a country, possibly for the world as the Iraq War has been.

MATTHEWS: Well, right, and it will be approved as quickly. And it will be approved under the gun and it will be approved under the threat, "If you don't do this now you're bringing our country down." This time, by the way, they're voting on it right as they go away for a recess before an election. Sound familiar?

MADDOW: Yes.

MATTHEWS: Same thing happened in 2002. They're being asked to vote without thinking. They're going to look at a package which, in this case, was a paragraph long - was the first look at this thing, give the secretary treasury unlimited powers to spend $700 billion. And you'll get some of it back, we can't tell you how much.

Again, a check without limit. Again, a Congress running a check and it's not telling you where the money is going to. It is a tricky time and I do think - I go back to the preamble. The reason that John McCain is in trouble every time conditions prevail.

In other words, we look at conditions to decide how to vote. Every time we do that, people reach for that default button and they say, "We're changing parties." And that's when he pulls a razzle dazzle. The series of events you just described are all razzle dazzle plays he called when he saw the voter going back to that default button.

It's time to vote change because that's what we're thinking about right now because of conditions. And I think you see it every time the issue of the economy gets stronger, he goes to a razzle dazzle play. And I think we saw it again tonight calling for a delay of the debates, "I'm not going to the debates. Fire Chris Cox. Bring in Gov. Palin. Call off the first night of the Republican convention," anything that changed the situation away from that default button where people naturally say when one administration fails, when one party fails, you try the other one. That's the natural inclination.

That's true north politically and every time he sees our compass going to that, he goes, "Shake the compass up. Don't let them see that. That arrow points to the Democrats."

MADDOW: Chris, there's also a stylistic point to doing this. I do think that, for example, with the choice of Sarah Palin or any of the other things that you just described, he gets sort of style points for boldness. They call this maverick behavior that he's willing to do something that creates such a big splash that is such a big surprise. But is there a risk that he looks not just bold, but desperate?

MATTHEWS: Well, how would you like eight years of razzle dazzle?

MADDOW: Yes.

MATTHEWS: I don't think people would like that. I think people like predictability and pattern and they like to see a philosophy carried out. They like to see some sort - he looks to use the word "mission." I think people do like that idea - a clear-cut mission. Are we going to extend the role or expand the role of the public sector? Are we going to reclaim the balance this country once had between public and private enterprise?

Will we bring back the role that government has always played in energy development, in transportation, in education, in regulation? Are we going to regain the balance we had before the '80s? That is a pattern and that is, in fact, a mission. I think that's Barack Obama's mission. What's McCain's? Razzle dazzle.

And I think it's what you do when you're out-powered by the opponent and by the times and by conditions. You have to pull the bootleg play, the Statue of Liberty play, all the plays in football you play when you're up against a stronger team.

MADDOW: You're probably better on football than I am. But I was thinking today that it's almost like it's having a football team that's all kickers because all they do is punt.

(CROSS TALK)

MATTHEWS: By the way, as you also pointed out, he scored a few points so far.

MADDOW: Yes. Well, kickers score a few goals too.

MATTHEWS: They get three-pointers every once in a while.

MADDOW: Chris Matthews, the host of MSNBC's "HARDBALL." Thanks for sticking around tonight. I appreciate it.

MATTHEWS: Thanks, Rachel.

MADDOW: With the economy liquefying, the bailout plan navigating the political minefield and Sen. McCain's poll numbers sinking like a stone falling through water. The McCain campaign has taken action. They are hitting the reset button on their whole campaign, right after rolling out some of the slimiest opposition tactics yet seen in this campaign. Maybe that's what explains the timing here. Are they trying to stop the campaign before they get hit with the inevitable APO(ph) backlash? We'll have more on that in just a moment.

(COMMERCIAL BREAK)

MADDOW: One note about presidential debates on American crises - a current economic peril is certainly historic and scary and the future is uncertain, to say the least. But it's not the first crisis to happen during the debate season. And nobody called off nothing before.

October 28, 1980, Ronald Reagan and Jimmy Carter debate in the midst of the Iranian hostage crisis. October 13th, 1960, John Kennedy and Richard Nixon debate after 33 people were injured when a bomb went off in Times Square (UNINTELLIGIBLE) explosion in 11 days. October 17th, 2000, George W. Bush and Al Gore debate just 5 days after the devastating attack on the USS Cole. A crisis such as this crisis, is the time when Americans need to see their leaders lead, to hear them discuss our problem and how they fix them. Things are bad but it's never stopped us before.

(COMMERCIAL BREAK)

MADDOW: As we've been reporting all afternoon and this evening, John McCain basically tried to hit the reset button on his campaign today, and not a moment too soon. But maybe not for the reasons he says. You may recall that last week, the economic crisis signaled the start of bad, gaffe-filled, no-message, angry week for the McCain campaign.

After the weekend, they showed how they intended to recover. On Monday, they launched their first TV ad, trying to tie Barack Obama to Tony Rezko and the, quote, "corrupt Chicago machine." Tuesday was the "Wall Street Journal's" term to dredge up Obama's long-ago work with William Ayers.

And today, ads are reportedly running in Michigan linking Sen. Obama to Rev. Jeremiah Wright and Kwame Kilpatrick, the disgraced ex-mayor of Detroit. The groups next ad, according to today's "New York Times" will highlight Obama's support for a Kenyan politician.

Franklin Raines, Rev. Wright, Kwame Kilpatrick, the Kenyan prime minister - do you think there's a point they're trying to make here? McCain folks may know something I don't about how effective these ads will be. But strategically, it's important to note that this guilt by association lowball opens the way for a return volley. And in the middle of the economic crisis, if the McCain campaign is opening the door to shady associations, don't we go instantly to the Keating Five?

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE NEWS ANCHOR: And now to Washington D.C. and government. Hearings begin this week into what is already being called a major Congressional scandal. It involves the $500 billion savings and loans bailout. It is about charges that five U.S. Senators tried to protect one S & L owner who contributed to their political campaigns.

(END VIDEO CLIP)

MADDOW: John McCain was one of those five U.S. senators. Now, he calls the entire episode a, quote, "very unhappy period in his life." When Chicago mayor Richard Daley first heard the McCain Rezko ad this week, he said, quote, "When you start throwing mud, mud is going to start being thrown at you and it's going to be sticking."

So, timing wise, I think it is fair to say that John McCain full stop to his presidential effort today comes as he found his campaign in perhaps quite a vulnerable place.

Joining us now is Matt Welch, who is the editor-in-chief of the libertarian publication, "Reason" magazine. He's also the author of "McCain: Myth of a Maverick." Matt, thanks very much for joining us.

MATT WELCH, EDITOR-IN-CHIEF, "REASON" MAGAZINE: Thanks so much for having me.

MADDOW: Tell us about the Keating Five. Who was Charles Keating and what was his connection to John McCain?

WELCH: Charles Keating was a freak of nature, a 6'5" former navy pilot turned anti-obscenity crusader. And most importantly, for our discussion, he was John McCain's first, single-most important political backer when McCain dropped into the State of Arizona for the first time of his life and ran for Congress.

He was responsible for about one-third of McCain campaign fundraising for his initial congressional career. And introduced him to sort of the rich society of booming Phoenix, Arizona, at a time when McCain needed all the connections that he could get.

McCain ended up having quite a long and very close relationship with Keating to the point of traveling to his resort in the Bahamas nine or 10 times on Keating's private jet. Keating was the owner of American Continental Corporation, which owned Lincoln Savings, which was incidentally my first bank.

And back in the 80s there was a real estate boom. Sounds kind of familiar. There were a lot of new financial instruments that not everyone quite understood. Interest rates were low - lot of eerie similarities to our situation right now. And when the worm turned, as all housing bubbles and other bubbles inevitably do, Lincoln Savings was the single biggest culprit of the entire episode when it went belly-up. It cost taxpayers $3 billion a loan. Keating spent five years in the federal pen and 20,000 pensioners lost their lifesavings.

MADDOW: You mentioned the real estate boom, the new financial instruments that people didn't necessarily understand, the multibillion tax to pay our bailout of the institutions. There are a lot of similarities here.

What's about what John McCain got in trouble for? What - his association with Keating was more than just personal?

WELCH: Yes. In 1987, five senators, John McCain, Alan Cranston, Dennis DeConcini and Don Riegle and McCain (sic) all met with federal regulators who were investigating Charles Keating and Lincoln Savings for a variety of violations, some of them quite serious and criminal.

They met with regulators on two separate occasions saying, basically, "Hey, can you hurry up your investigation? What's the status of it?" Those kind of meetings were very, very unusual. The investigators felt pressured and immediately turned around and reported that to the House and the Senate, right at the time that the savings and loans were going belly-up in the late 80s.

These meetings happened in 1987, but the savings and loans really became sort of a crisis in '88, '89. Right about that time, these stories percolated of these improper meetings and so there was a super long senate ethics investigation into those five senators to see whether or not they delayed the investigation into Lincoln Savings and therefore, delayed sort of a justice happening to the people who suffered under Keating's misrule.

Eventually, they came out and basically slapped John McCain and John Glenn on the wrist accusing them of poor judgment and nothing else. The other three senators received more serious sort of smacks on the behind, if you will. McCain was the only one to remain in the Senate for more than six years. Three eventually did not run for reelection. I think John Glenn did.

McCain - which he has described as the worst, lowest point of his life, lower even than his prison time in Hanoi. After that, he became a big reformer of the campaign finance system which got him in trouble in the first place.

MADDOW: Matt Welch, editor-in-chief of "Reason" magazine, I have a feeling this topic is going to be getting you a lot more bookings in the future. We expect you'll be back to join us. Thanks for joining us.

WELCH: Thanks for having me.

MADDOW: This is "The Rachel Maddow Show" here on MSNBC. We'll be back in just a moment.

(COMMERCIAL BREAK)

MADDOW: Finally, before we go, it's time for a few underreported holy mackerel stories in today's news. There aren't too many things in the intelligence world that Americans know the acronyms for. There's the CIA, the FBI, the NSA - sure.

But these past eight years, we've had to learn some others. The PDB, for example, the President's Daily Brief. We learned that one when Condoleezza Rice admitted that Bush stayed on vacation after getting a PDB titled "Bin Laden Determined to Strike in the United States."

We've also learned one other big acronym, the NIE, the National Intelligence Estimate. An NIE is a statement of what the intelligence community thinks about a national security issue. We learned what an NIE was when we learned that the administration cooked one before the Iraq War to help justify that invasion. That NIE was then selectively declassified to reporters to help the drive to war.

More recently, the NIE on Iran was declassified and made public. That was the one that said Iran stopped its nuclear weapon's program five years ago. Well, now, we've learned a new NIE on Afghanistan is just about done. But this one - they're going to keep it secret until after the election.

We're approaching the start of year eight of our war in Afghanistan. It's expected that the NIE will be dire, a stark reminder of perhaps the most gut-wrenching national security failure of the Bush administration. No need to bring up such unpleasantness right before the election, he said.

Finally, John McCain has pointed to his time as chairman of the Senate Commerce Committee to claim economic expertise. Last week, a McCain economic adviser made the whole issue of the commerce committee chairmanship awkward when he implied that John McCain as chairman invented the Blackberry.

John McCain, of course, famously has said he does not use the E-mail. The Blackberry was, of course, invented in Canada. And to make matters that much worse, "Politico.com" now reports that when given the opportunity to vote on legislation that didn't pave the way for the Blackberry, McCain voted no. No wonder he wants to control-alt-delete or simply restart his campaign.

That's all for now. Thank you very much for watching tonight, our special coverage here. We'll see you back here at 11 p.m. Eastern for a special show, a fresh show, about the president's speech. Sen. McCain suspending his campaign, Sen. McCain's efforts to get Friday's debate delayed. Sen. Obama's pushback on that. That's all coming up. "COUNTDOWN" with Keith Olbermann starts right now. Good night.

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

END

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