updated 9/26/2008 1:45:47 PM ET 2008-09-26T17:45:47

RACE FOR THE WHITE HOUSE

September 25, 2008

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.Guests: Christopher Dodd, Bob Corker, Joe Scarborough, Michelle Bernard, Lawrence Summers, Bob Casey, Richard Wolffe

DAVID GREGORY, HOST: Tonight, our special coverage of this breaking news continues. Let's make a deal.

President Bush summons Senators Barack Obama and John McCain to the White House for an historic meeting on the financial crisis as the future of the president's Wall Street bailout bill hangs in the balance.

Forty days to go in the race for the White House. And it's a wild one.

Welcome to the program. I'm David Gregory.

My headline tonight, "Joining Forces." President Bush and the candidates play "Let's Make a Deal" inside the White House today in an historic meeting to discuss the financial crisis. Senators Obama and McCain joined leaders from both the House and the Senate to hammer out an agreement on the $700 billion bailout plan, but not everybody is on board.

Republican Senator Richard Shelby of Alabama emerged from the White House not long ago and said this...

(BEGIN VIDEO CLIP)

SEN. RICHARD SHELBY ®, ALBAMA: I can tell you I don't believe we have an agreement. I have voiced my concerns all along. I don't know if you have this, but I have a five-page-five pages of the leading economists in America that wrote to me and the leadership saying the Paulson plan is a bad plan, it will not solve problems, it will create more problems.

(END VIDEO CLIP)

GREGORY: Earlier today, Republican and Democratic leaders from both the House and the Senate said something different, that they announced after a three-hour closed-door meeting that indeed there was a bipartisan agreement on principle, and in principle that it had been reached.

Listen.

(BEGIN VIDEO CLIP)

SEN. CHRISTOPHER DODD (D), BANKING COMMITTEE CHAIRMAN: We've reached a fundamental agreement on a set of principles, one for taxpayers, which is tremendously important. We're giving the secretary authority that he will need in order to act and the funding that he will need. We also have dealt I think effectively with the issue of effective oversight, with homeownership preservation, as well as executive compensation.

(END VIDEO CLIP)

GREGORY: All right. A few big questions, a few big issues right now as this story continues to unfold.

And you see Senator Dodd here of the Senate, a Democrat, of course, chairman of the Banking Committee, who joins me.

Senator, let me start with you. I want to just tell our audience that we are waiting for Senator Obama, who is going to be taking questions at some point this hour, we think maybe in about 20 minutes on all of this.

Also some news about whether the debate will go forward. We don't know for sure. I have spoken to Obama sources who indicate they still think it's going to go on. But let's get to the business at hand, Senator Dodd.

Deal or no deal? Which is it?

DODD: Well, we went down there to make a deal, and the Paulson plan, that's dead. I mean, Dick Shelby has been against it from the very beginning.

This morning, about seven of us from the House and the Senate, Democrats and Republicans, sat down with each other to determine whether or not there was any common ground to respond to a situation that's been called very grave by major economic leaders in the country, and to move forward to see if we can come up with a plan that would allow us to rescue this, to work out these financial difficulties. And we're going to continue to doing that.

What happened at the White House, quite candid, David, was that instead of being a rescue plan for our economy, it was a rescue plan for John McCain. This was theater for the last two hours instead of doing up here-we finished work about 1:00 today on this set of principles we kind of felt we could move forward on. And I'm going to get back to work on that, quite candidly. I'm sorry we lost two or three hours in what was just a show down at the White House.

GREGORY: Yes.

DODD: The Republicans in the House I think need to get their act together. I listened to Republicans in that meeting, as well as Democrats, say to the president, we understand the gravity, none of us like this. We're willing to step up and do something, but we want to make sure that taxpayers and accountability and homeownership are going to be a part of it, and executive pay.

GREGORY: Right.

DODD: Don't ask us to write a check for $700 billion and walk away. That isn't going to happen. And to that extent, clearly the Paulson plan is dead. But for the life of me, I don't quite understand what was going on down there except political theater.

GREGORY: Well, is it political theater on both sides, Senator?

Senator Obama was there as well.

DODD: Well, he got invited. He got asked to go. The president of the United States called him and said, I'd like you here. He responded to the president of the United States. He didn't ask to be there. None of us did.

We were asked to come down to sort of sit in a room, I guess, to listen to the House Republicans talk about some core idea they had that was different than what Hank Paulson has in mind. For six days, David, I've worked on a plan that-the Paulson plan that was set up, we changed it dramatically.

But all of a sudden, to be told there's some new idea kicking around, I didn't need to be in the White House for that, basically to have a photo opportunity for John McCain. That's not what we're here for.

GREGORY: Senator, help me through this, because there is a lot to really digest here and a lot to understand. And I think it's also important to point out, while we are talking about $700 billion, there is other federal money that's already been committed potentially to Fannie Mae, Freddie Mac, also to bail out AIG. So the taxpayer is on the hook in a pretty big way here, even beyond the $700 billion.

Walk me through what you think the elements of the agreement are and then what the sticking points are.

DODD: Well, again, a lot of people are raising questions about what the secretary of the Treasury wants to do. I've got questions, too, but I don't think 535 members of Congress ought to design an economic plan.

What we ought to do is insist that taxpayers come first, we ought to insist there is accountability so we are not just writing a check to this secretary and his successor without any kind of safeguards in here to make sure this money is going to be spent properly, that homeownership and foreclosure are still at the core of the problem. That no one up here that I know of-and I'll tell you right now, this plan doesn't go anywhere if you are going to have-allow compensation or golden parachutes for some of the very people who created this problem.

Those are some of the principles around which I think we had a pretty good agreement this morning.

GREGORY: Right.

DODD: Now we have to go to our caucuses, and four different caucuses. You have to talk to the Treasury Department about whether or not you can do this at all. And all of us in that room understood that.

We are trying to move forward in a way that this moment calls for. And to go down to the White House for a photo-op to help out John McCain and his campaign because the president-I regret. I think the president is serious about this, but frankly we didn't need that two or three-hour distraction.

GREGORY: All right. But so where are you getting bogged down? What is holding this agreement up? Because there seemed to be some agreement on some of those broad principles that you just outlined.

DODD: Well, again, I think we have to go back to our caucuses and talk about them.

We need to now flesh it out in real language.

I don't expect members to sign on to a principle without seeing the language. And we're trying to do that.

GREGORY: Yes.

DODD: My staff has been working along with-these are serious people in the room, David. Bob Bennett of Utah is a serious senator, as is Judd Gregg of New Hampshire, as is Bob Corker, Republicans all sitting in that room, along with Barney Frank, along with Chuck Schumer and Jack Reed of Rhode Island and Kent Conrad. These are serious people, the Finance Committee in the room, rolling up their sleeves and...

GREGORY: Do you think you have the votes as we sit here and we talk right now?

DODD: I don't know that yet. I have got to go back to my caucuses and talk about this.

GREGORY: OK.

DODD: They want to know. And they've got a lot of questions.

And candidly, David, there will be people who are going to vote against this. I understand that. I'm not committed to voting for it yet until I see the final package.

But as the chairman of the committee, when the president of the United States and the secretary of the Treasury and the chairman of the Federal Reserve and other economists tell me we are in grave danger of our economy collapsing and that jobs and retirement and 401(k)s and student loans and a lot of small businesses are in jeopardy, my job is to try and respond to that. That's what we're doing.

GREGORY: Do you think, finally here, Senator, do you think the government, the taxpayer will see a return on this investment, a return on this loan down the road?

DODD: I think that could be the case. That certainly happened in other cases where it ended up costing us less than the original outlay.

That certainly was the case in Chrysler, it was even the case in the S&L. We didn't get all the money back. In fact, in the Depression, we got all of the money back and made money. So there are different models that have worked better than others.

This is uncharted waters. We have never had an economic crisis like this. And so this is unique and requires some real hard thought out there, more so than any other economic crisis I can think of. But certainly our hope is to design a plan that produces that, where taxpayers, which we've insisted upon and gotten agreement, actually have warrants here, actually are going to be a beneficiary, enjoying some of the profits that come back if this plan works.

GREGORY: All right. Senator Chris Dodd in the middle of the negotiations, taking a couple of minutes for us.

We appreciate it, Senator. Thank you.

DODD: Thank you. Thank you, David.

GREGORY: Just want to bring you up to date on a couple pieces of news.

One, the McCain campaign is saying tonight that there is not a decision on whether they will go to the debate. Obama sources tell me they think it's going to go forward. That is still unfolding.

Negotiations continue on this bailout plan. And Senator Obama is supposed to talk to reporters in about, who knows, 10, 20 minutes, sometime this hour. When it happens, you'll see it here, we'll bring it to you live.

Let's keep talking about the bailout plan and a view from the

Republican side of the aisle

I'm joined now by the aforementioned Senator Bob Corker, Republican senator from Tennessee, a member as well of the Senate Committee on Banking, Housing and Urban Affairs.

Senator, welcome.

SEN. BOB CORKER ®, TENNESSEE: I'm glad to be with you. Thank you.

GREGORY: Thank you.

Where are you on the bailout?

CORKER: Well, I was part of the group that was trying to put restrictions in place so taxpayers are protected, that in fact there is proper oversight, and those things that are important to make sure that this concept, if you will, becomes a real bill and works for the American people. So I'm in agreement with the agreement we had at 1:00 today.

GREGORY: So what happened then? What is going on the Republican side of the aisle, if that is where it's breaking down?

CORKER: Well, I think that there is no breakdown among the members that were involved in this. I think Chris Dodd said it well.

Look, people are going to vote against this. There is no upside to vote for a bill like this.

We understand the crisis that is here. We understand we have to make some really tough decisions to make sure that families across this country are not harmed. And we know there is no upside to be involved in this, but we know it's the right thing for the country.

So we have outlined four or five principles that we agreed to. The staffs are drawing those up right now. And my sense is that we have a great chance, and I expect will, pass legislation by Sunday evening before the markets open on Monday. That is what I hope will happen and that's what I'm working towards.

GREGORY: Senator, you are on the Banking Committee. I didn't hear you mention Senator John McCain, who has suspended his campaign to be the leader of his party and help work this deal out.

What impact has he had? You heard Senator Dodd say it's nothing but political theater from him.

CORKER: Well, I think having presidential candidates and the president bring focus to this is important for the American people. You know, much of the issue is among the financial institutions. And the ordinary citizen who's out there working every day may not yet understand the impact to them if this does not work out.

So I think they've brought focus to it. Certainly each of them, both presidential candidates, can be very effective in their caucuses as far as rallying votes.

I'm not sure, candidly, that typically in this type of negotiation, it's not the type of thing they would orderly be involved in. And I think their role might be after the fact, after an agreement is made, to really help rally folks knowing that this is very important to the country.

GREGORY: How many Republican votes do you think there are right now for this plan in the Senate?

CORKER: You know, we talked about this plan today at lunch among Republican senators. And I sense people understand the critical nature of this.

I think that this agreement basically hit the points that most of them are concerned about. Certainly everybody is hearing from constituents who are angry about this.

Look, we're all angry about the excesses on Wall Street. At the end of the day, what this is about though is Main Street.

We understand how devastating a breakdown in our credit markets will ultimately be to the American people. So I think at the end of the day, if we could put some meat on the bones and get this legislation actually drafted, which is happening right now, I think there is a very good chance that it would pass.

GREGORY: All right.

CORKER: Let me say this-I think that we will deal with this based on what I know if we can move the theater away from this. I think we will deal with this by Sunday evening.

GREGORY: By Sunday evening. Do you think the debate goes forward, by the way, Friday?

CORKER: You know, that's not in my sphere of influence right now. I'm hunkered down trying to make sure we resolve this.

GREGORY: Senator Corker of Tennessee.

Thanks very much for taking the time.

We'll take a break here, continue our coverage.

Coming next, we go "Inside the War Room."

McCain and Obama came together today at the White House, but earlier today they created some pretty sharp words about whether tomorrow's presidential debate should go on. No movement on that at this hour.

Plus, what Governor Sarah Palin had to say when asked about McCain's record on regulating Wall Street, when THE RACE returns after this.

(COMMERCIAL BREAK)

GREGORY: Back now on RACE FOR THE WHITE HOUSE.

Senators John McCain and Barack Obama returned to Washington today to deal with this economic crisis.

We want to go to the war room now with MSNBC political analyst Michelle Bernard, and president of the Independent Women's Forum, and "MORNING JOE" himself, Joe Scarborough, host, of course, of MSNBC's "MORNING JOE."

Joe, I want to start with you.

This is a pretty unique situation. We're going to hear from Barack Obama, we think, in the moments ahead, as he's taking some questions on all of this.

But let's talk about Senator McCain as well. There's the question of the debate, there's the question about his presence here in the middle of this bailout. And there's a big philosophical debate about this, the nature of a huge government bailout, when he is running for president, when it's tearing apart the Republican Party in many ways.

Where are we?

JOE SCARBOROUGH, HOST, "MORNING JOE": Yes. The Republican Party is split in half. And it has been since 1994.

Everybody in the national media like to talk about the religious right and the-that's not it. It's "Wall Street Journal" Republicans that get their news from "The Wall Street Journal" editorial page, for free trade, for these type of bailouts, for Wall Street. And then you've got the populists. You've got more Libertarians that came in, in 1994, and really took control of the party.

That's our working base right now in the Republican Party. If you're going to run, you need those people, and you also-sort of the Ron Paul base. And you also need the Mike Huckabee base.

John McCain is separated from both of them. This is a worst-case scenario for him, because he separates himself from the base.

Palin helped him, helped bring that base back to him. But the same people that didn't trust him because of illegal immigration, the same people that don't trust him because of free trade issues, are the same people who are going to be very, very disappointed that he is going to be the savior of the $700 billion bailout.

GREGORY: Well, but the flip side of that, Michelle, is that if you are part of a party that will get blamed potentially, politically for a lot of this, don't you also want to exercise some crisis management and try to be part of the solution and claim some credit for that politically? That's the tightrope he's on right now.

MICHELLE BERNARD, MSNBC POLITICAL ANALYST: That's the tightrope he's on. It's a very, very risky game of chess that he's playing, but that's exactly what he is trying to do.

George Bush is going to be blamed for this no matter what happens. We've heard a lot of people saying that the name of the game and the original sin was Fannie Mae and Freddie Mac. But I believe that most people-or most members of the American public are going to blame it on Bush.

And I think what John McCain did yesterday, whether it was a smart move or not, we will know that in the future, but I don't think he had a choice but to do it. He needed to go in, kind of pull the reins away from Barack Obama, and say I'm going to be the savior. The question for him now, in terms of this philosophical debate we're having on the proper role of government, is whether or not he votes for the bailout or he comes up with a better plan and prays to God that it works.

GREGORY: Right.

SCARBOROUGH: It was George Bush's, but he just made it his own. I would have stayed out of town. He over-thought himself. He was to clever. Stay the hell out of Washington, D.C., while you're bailing out Wall Street tycoons. It's simple.

GREGORY: Well, let's get the back-and-forth on the political gamesmanship and maneuvering on both sides.

This was Senator McCain talking about his decision to suspend the campaign, and then also Barney Frank, Democrat, saying it wasn't doing anything but a political stunt on McCain's behalf. Listen.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN ®, PRESIDENTIAL CANDIDATE: I'm an old Navy pilot and I know when a crisis calls for all hands on deck. That's the situation in Washington at this very hour when the whole future of the American economy is in danger. I cannot carry on a campaign as though this dangerous situation had not occurred or as though a solution were at hand, which it clearly is not.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

REP. BARNEY FRANK (D), MASSACHUSETTS: The notion that he is 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.

(END VIDEO CLIP)

GREGORY: So Michelle, we've heard-then Senator Dodd piled on as well on the Democratic side, saying, you know, this meeting down at the White House today had nothing to do with the negotiations that are actually going on on the Hill.

BERNARD: Well, here is where I don't think that works for the Democrats. Let's assume, you know, worst case scenario that they're right, that it's political gamesmanship on the part of McCain. The public doesn't care.

They don't want to see partisan politics now. The American public is worried about pension funds, savings accounts, and whether or not they're going to be able to cash their paycheck next Monday or next Friday when they get paid.

They don't want to see the partisan bickering. And the one smart thing that Senator McCain has done in the last day he has sort of taken the partisanship out of this and said, I'm going to come to Washington and I'm going to work across party aisles and see what we can do to fix this problem.

GREGORY: All right. Both of you stick around. We're going to get a break in here.

Coming up, Bill Clinton joins THE RACE.

Plus, what Hillary Clinton told Joe, this Joe, "MORNING JOE," about tomorrow's debate. It's on THE RACE's radar coming up right after this.

(COMMERCIAL BREAK)

GREGORY: Back now to look at what else is on THE RACE's radar tonight in this unfolding story.

The big former president comes out. Former President Bill Clinton says he will hit the campaign trail for Senator Obama starting next week. Clinton says the Obama camp plans to send him to Florida, Pennsylvania, Ohio, and Nevada, where Hillary Clinton did well in the primaries, all those states.

Senator Clinton is already campaigning for Obama. But she told "MORNING JOE" this week she thinks the debates will do the most to convince her supporters to vote for Obama.

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D), NEW YORK: As we get into these debates starting Friday, when people will be able to compare and contrast the positions between the candidates, I think you'll see that gap not only close, but I'm confident that we're going to win in November.

(END VIDEO CLIP)

GREGORY: You know, Joe, one of the reasons I think the debate is so important Friday, if it happens, is that if Barack Obama has built some momentum because of this economy story, if he can eat into McCain's advantage on foreign affairs, he may really have something here.

SCARBOROUGH: Oh, there's no doubt about it. If Barack Obama wins tomorrow night, if we have the debate tomorrow night, he is off to the races. It's going to be extremely hard for John McCain to catch up.

Obama's problem is high expectations. And they're not really fair high expectations, because while he can deliver a speech to huge crowds, remember, 21, 22 debates with Hillary Clinton, most of suggested that Hillary won 20 of 22 debates against Barack Obama.

He is not a good debater, for whatever reasons. He was terrible with Rick Warren. McCain was relaxed. I mean, Obama's camp needs to really knock down the expectations here, because Americans that aren't really tuned in are going to expect him to do much better than John McCain.

GREGORY: All right.

And on the other side, how does Senator McCain now maneuver this between now and the debating time? He said-they're saying tonight if there is not a deal-they haven't made a decision yet, but if there's no deal, that they're just not going to show up.

BERNARD: Yes. And, you know, again, it is so dangerous, because literally, I keep trying to imagine, what does it look like tomorrow if we see Senator Obama standing at the podium and people are scratching their heads and saying, "Where is John McCain?" Particularly when we have people like Barney Frank and probably other Democrats will go marching down on the Hill and saying, you know, he parachuted in, we don't need him, Hank Paulson, the president and the other members of Congress are perfectly capable of taking care of this.

I honestly think that Senator McCain needs to be there tomorrow. I cannot imagine that given the fact that-or despite the fact that this debate is supposed to be about foreign policy, that they will not find a way to wrap the global economy into the discussion.

GREGORY: All right. We will leave it there.

Michelle Bernard, Joe Scarborough, thank you both very much. Really appreciate it.

SCARBOROUGH: Thanks.

GREGORY: Coming next, I'm going to go one-on-one with top Obama adviser and former Treasury secretary Lawrence Summers. He'll join me to talk about this bailout plan, whether it's going to work, when THE RACE returns right after this.

(COMMERCIAL BREAK)

GREGORY: An historic day, but just what will the history books finally say? Senators McCain and Obama met with the president at the White House today. I am going to speak with a top Obama economic adviser about the proposed bailout fix coming next.

Welcome back to RACE FOR THE WHITE HOUSE. I'm David Gregory in Washington tonight. Even if there is an agreement on the bailout bill, what lies ahead for the next president of the United States? We're also going to hear from Senator Obama sometime this hour, we think, as he is taking some questions from reporters on his participation in the meeting at the White House today.

Joining me now is Lawrence Summers, former secretary of the treasury under President Clinton and former president of Harvard University. Secretary Summers is now an adviser to Senator Obama.

LAWRENCE SUMMERS, OBAMA ECONOMIC ADVISER: Good to be with you.

GREGORY: Good to have you here, Mr. Summers, as always. There is a lot at stake here. You are a supporter and adviser to Senator Obama, of course. But you have also been through this on the inside as Treasury Secretary and somebody who knows the markets and knows this economy well. As you watch the negotiations move forward over the bailout, what is on your mind tonight?

SUMMERS: Well, I hope that we'll get to an agreement. I hope it will be an agreement that will reflect the principles that Senator Obama was really the first to lay out last Friday morning, when he talked about the importance of minimizing burdens for tax payers, the importance of accountability, where others have attributed to creating these difficulties, where he talked about the idea of mutual responsibility, where he talked about the importance of making sure that the government was very careful in-did this in a considered way, so there was no blank check for any individual.

I just hope that this will get done quickly and that it will be done well. These problems didn't get made overnight. They got made by a set of fairly serious-very serious mistakes in government in these last years and in the private sector as well. They are not going to get corrected overnight. But with a very dangerous situation, what you need to do is-what we as a country need to do is be decisive, but also be wise. And so you can't just rush just anything given the size of the financial stakes involved. At the same time, we've got to get to an agreement if we are going to be in a position to restore confidence. It is a difficult situation.

GREGORY: Let's talk about the actual substance. When you were on the program last week, you laid out four problems that got us into this position. I want to remind our viewers of what you said and then ask you if this addresses it. Let's play that tape.

(BEGIN VIDEO CLIP)

SUMMERS: We committed ourselves to deficits and foreign borrowing which blew up the bubbles. We eviscerated the mortgage regulation that prevented the kind of subprime exploitation we've had. We abandoned the effort to have investment banks be closely regulated and turned the regulation over heavily to themselves. And as the problems mounted, we gave speeches about how the fundamentals were strong. We didn't take strong actions, except when pressed by Democrats to do it.

(END VIDEO CLIP)

GREGORY: What is this bipartisan solution, as it is still winding its way through the process, do to address those four points?

SUMMERS: Well, we can't put the genie back in the bottle. This crisis got made. We can't turn back the deficits of the last few years. We can't have mortgages not have been given that shouldn't have been given five years ago. What it does represent is an attempt to respond firmly to what is a substantial financial panic situation. And that's why a carefully crafted measure can, I think, provide an important boost to confidence, if it is crafted carefully.

But if there is a sense that money is going to be thrown around idly or there is a sense that assets are going to be purchased at a price that is higher than tax payers need to pay, then that is going to undermine confidence and it's not going to work. So that's why Senator Obama and Chairman Dodd, Congressman Frank, have been very focused, with the benefit of advice from a wide group of financial experts, on trying to craft as constructive a bill as we possibly can.

Yes, we do need to act. That doesn't mean we can't also think very carefully as we act. What's most important to me in this situation, and I've seen situations like-in some ways like this before, when Mexico was on the brink of bankruptcy during President Clinton's term. There's a need to be decisive, but also a need to very carefully consider the finances. That is what Senator Obama has been trying to do with his advisers like Fed Chairman Paul Volcker.

GREGORY: We are talking about the substance of this. A little bit of news from Mike Viqueira, who is our Congressional correspondent and producer. Out of the House, Minority leader John Boehner is saying now that he cannot support this bailout measure as it is presently constructed and that if Speaker of the House Nancy Pelosi wants to move forward, she'll have to take this to the floor and that she will be on her own. So these negotiations continues. The philosophical debates, the political debates continue.

Part of that, Secretary Summers, has to do with whether this is simply throwing money down the drain here. A bailout that doesn't have any real promise of fairness or a return for tax payers. Warren Buffett said today that he thought, in fact, the government could make money off the purchase of these bad assets from the investment banks. Do you agree or disagree?

SUMMERS: I think if the government does this right, carefully and thoughtfully, with the advice of people like Warren Buffett, who has been advising Senator Obama, there may be no cost. The government may actually turn a profit. It is possible there will be a small loss.

I'm very distressed what I heard you just report from Congressman Boehner. I think this is too hard and too important for the kind of partisan fights we so often have. I'm surprised that at this late hour there would be a new set of objections interposed by the Congressional minority. The broad outlines of this bill have been clear for quite some time.

GREGORY: Right.

SUMMERS: So it's troubling to me that-you know, maybe I'm wrong and maybe I'm misinterpreting this. I hope things will work out and this is a little bit of scuffling at the end. But I think it would be tragic if anyone tried to play politics with this.

GREGORY: You dealt with a collapse of markets in Asia and South America. This is what you told "The Economist" for their piece that's running, in terms of the role of the government in all of this: "there is far more risk that the authorities will have too little flexibility than there is risk that they will have too much authority."

Do you think there is a rush here to deal with this fairness issue, instead of giving the treasury secretary a big enough hand, a heavy enough hand to do what he thinks he has to do here?

SUMMERS: I think you've got to have-nothing in a Democratic society can just be up to one person. That's why Senator Obama has stressed the importance of oversight from the beginning. We've got to have some clear principles that the purpose of this is to stabilize the broad financial system, not to avoid losses on Wall Street. Those kinds of principles have to be clear.

But we can't know what the financial problems of two months from now are going to be today. We can't be certain precisely how instruments are going to be structured. That's why it seems to me and seems to Senator Obama and to others he has worked with that it's so important that we have a principle-based approach in which Congress enunciates a number of clear principles, but doesn't try to tie the hands as to is it going to be preferred stock or common stock. Those aren't discussions that are best made as absolutes in a legislative process.

GREGORY: Secretary Summers, quickly here, this is the bottom line, everybody from Wall Street to Main Street; do you think this is going to work if it passes?

SUMMERS: There are no certainties in life, but the prospects for our economy and financial system will be much greater if it passes than if it does not.

GREGORY: All right. Former Secretary of the Treasury Lawrence Summers, I really appreciate you coming on to walk us through this.

SUMMERS: Glad to be with you.

GREGORY: Coming next, Senator Bob Casey of the Banking Committee joins me with the latest on the bailout fix, the latest on the negotiations. Also, our own Brian Williams has spoken to John McCain. We will have a portion of that interview coming up next. We are still waiting to hear from Senator Obama, who is going to take questions from reporters after his meeting at the White House today. All of this still unfolding. A bailout plan in flux tonight and Washington waiting. We'll come back on THE RACE right after this.

(COMMERCIAL BREAK)

GREGORY: We're back on RACE FOR THE WHITE HOUSE. The president's bailout plan still hanging in the balance now. Joining me to talk about it is Bob Casey, Democratic senator from Pennsylvania, also a member of the Senate Banking Committee, the committee on Housing and Urban Affairs as well. Senator, good to have you here.

SEN. BOB CASEY (D), PENNSYLVANIA: Thank you, David.

GREGORY: Are you prepared to vote for this? If you are, why?

CASEY: No, not yet, because I have not seen the details. I was hopeful today after-if you had asked me last night, I would have said we had a long, long way to go. Today, it was a lot of optimism, a lot of momentum, and an agreement on principles, some basic principles that I have been insisting on with regard to more help for home ownership to keep people in their homes, more efforts to provide oversight. The executive compensation issue was very important to me and so many others.

It seemed today, as of 1:30 or 2:00, that there was an agreement at least on principles on three or four major items. That was the result of a lot of hard work by Chairman Dodd, Chairman Frank and Democrats and Republicans. Now it seems that some Republicans, this is just a few, and apparently led by John McCain, have taken this in a different direction.

GREGORY: You mentioned John McCain. NBC News' Brian Williams has interviewed Senator McCain following his meeting at the White House this afternoon. Let's listen to a portion of that.

(BEGIN VIDEO CLIP)

MCCAIN: Doing what I did coming back to Washington, getting with my colleagues, talking, discussing and coming up with, I hope, consensus and sufficient bipartisan bicameral support is what I think I need to do for the country. If that hurts me politically, I'll gladly take the penalty.

(END VIDEO CLIP)

GREGORY: Senator, what impact is Senator McCain having? You alluded to it just a moment ago.

CASEY: I don't think we are sure yet. All I know is that there was a lot of consensus, two houses, two parties in the early afternoon. The only thing that changed between early afternoon and late in the evening was John McCain was moving around Capitol Hill. I think that for him to make the assertion that somehow Democrats and Republicans who have been meeting for days now, for more than a week-we had meetings last Friday with the Republicans and Democrats in the Banking Committee, that far back. For him to say now that somehow we need him to bring about consensus, I think, what transpired this afternoon contradicts that.

GREGORY: Senator, you are saying two different things. On the one hand, you are saying he has no impact on the process. On the other hand, you are saying he is actually leading an effort on the part of some Republican and conservatives in opposition to this. Is that what you understand it?

CASEY: I think it is entirely possible, based upon what transpired this afternoon, that a consensus was-which had been arrived at between Democrats and Republicans in the House and the Senate, started to be threatened by what Senator McCain was doing. I think it is up to him now and to his Republican colleagues, who seem to be conflicting with their own party, to try to put this back on track, because right now the concern that I have and a lot of people have is not just that everyone on Capitol Hill get along. That is secondary. What I'm concerned about are small businesses and families who can't have access to credit to buy an automobile, to make payroll on a small business, to send their kids to college.

We are worried about credit and credit at the family level, at the community level.

GREGORY: Let me just bring people up to date on some of the breaking news here. Brian Williams' interview with Senator McCain also produced additional news that Senator McCain does hope and says he's hopeful that he will be at the debate tomorrow. I spoke to top Obama sources throughout the afternoon who indicate they feel like the debate will go on. Certainly, the economy is going to be part of this, as well as international affairs, which was the agreed upon topic for this debate.

I want to ask you about this bailout plan, and when you go home to Pennsylvania and people say to you, senator, I'm having a hard time making the mortgage payment; I can't get a loan for a car; I'm a small business; I can't keep it going; and they say to you, how is this going to work? Will this actually work to make my life a little easier? What do you tell them and why?

CASEY: What I have tried to focus on is the current problem we have. The problem we have is-as complex as it is, it's very simple in terms of what the problem is. We have a credit problem. If banks aren't willing to lend money to a small business or lend to a family to do all the things we do in our lives with credit, the economy has frozen up and that is causing real economic stress.

The problem we have going forward is if we don't come to some agreement and have something that is very positive moving in the right direction for tax payers and for the country and for the economy, that freezing up of credit is going to cause long-term problems. I think we're moving in the right direction to come together, Democrats and Republicans. Even senators who don't agree on anything else are coming together to work on this. We have more to do today and tomorrow.

GREGORY: Let's talk about leadership in all of this. The "New York Times" editorialized this way this morning, "given President Bush's shockingly weak performance, the only ones who could provide that are the two men battling to succeed him. So far, neither John McCain nor Barack Obama is offering that leadership."

Do you disagree with that? What leadership has Senator Obama provided here in getting this bailout through and providing leadership to look forward on an economic crisis that will be with the next president for sure?

CASEY: I think Senator Obama has provided the kind of leadership we would expect not only in a nominee for president but in a president. I think he has acted and demonstrated, as he has on numerous occasions in this campaign, the kind of leadership we expect.

What does that mean? That means setting forth principles with regard to tax payers, with regard to fairness, with regard to moving the economy forward. And secondly, by consulting with the kind of expertise that any president should consult with at a time of economic crisis.

He hasn't been a grand-stander. He didn't try some stunt to come back to Washington to try to play politics. I think he showed the kind of measured, calm and focused leadership we would expect in any crisis, especially one that has its foundation in our economy. I think it was abundantly clear between the way he has conducted himself, especially in the last few days, and what Senator McCain has been doing.

GREGORY: Senator Bob Casey of Pennsylvania, from the Banking Committee as well. Senator, thanks, as always.

CASEY: Thank you, David.

GREGORY: Coming next, a preview of tomorrow's first presidential debate. If it goes on, McCain and Obama indicating they think it will at this stage. We'll get more into the reporting of it and we'll bring you the latest when THE RACE returns after this.

(COMMERCIAL BREAK)

GREGORY: Back now on RACE FOR THE WHITE HOUSE. The question is how to get from today's economic agreement to the real deal. Joining me now, Richard Wolffe, senior White House correspondent for "Newsweek" and MSNBC political analyst. He is now covering the Obama campaign full time. Hi, Richard. Let's hear from Senator Obama. He sat down with Brian Williams tonight, talked about the bailout negotiations, the politics, the debate. Let's listen.

(BEGIN VIDEO CLIP)

OBAMA: Sometimes if you inject presidential politics into some delicate negotiations it is not necessarily constructive. It is amazing how much people can get done when folks aren't worried about taking the credit or passing the blame. I think we had seen some progress and my hope is we can build on this progress.

(END VIDEO CLIP)

GREGORY: We are seeing some progress is the point of the byte. He talked about the political grand-standing here. Inside the McCain campaign, we have heard some of that. Inside Obama's campaign, how do they view this day substantively and politically?

RICHARD WOLFFE, "NEWSWEEK": They didn't really want to have to do this, of course. They were arm twisted into being here and want the photos to look like they're doing something. Their position has all along been that there is a difference between campaigning and how this kind of difficult complex negotiation was going to proceed. It has proceeded, is proceeding along a dynamic that isn't really about a difference between Democrats and Republicans.

The difference here is an ideological one, mostly, not entirely but mostly with House Republicans against the Bush administration. The small government against the big government guys. That isn't something Obama can resolve. It may be something that McCain can usefully intervene with. That is a test for him and the conservative base of his own party.

GREGORY: It's a huge political risk for him. On the one hand, he can get involved in crisis management and perhaps take some credit for this. Could be helpful for him politically, whereas Obama is more on the sidelines in all of this. At the same time, he could end up championing a bill that is so deeply unpopular with the base of his party that he will suffer a huge penalty for that.

WOLFFE: I think the calculation in the short term, certainly talking to people who are very close to President Bush, is that at least McCain looks like he's taking action. That's what people want to see right now. Maybe earlier on in the crisis, they were looking for reassurance. That was Obama's strength. Here you have McCain flying in, jetting out. There is activity there.

The question is how do they resolve this not of the debate. Does he show up? Does he not? Is Obama going to get the time on his own? That is going to be very awkward to play out.

GREGORY: Yes. Both-McCain is saying he thinks he is going be there. The Obama folks I've spoken to, I've said here throughout the hour, think the debate is going to go forward. They are going to talk about the economy for sure. Senator Obama would love to talk about it for the whole time, I would assume.

WOLFFE: You know, both of them think they have something strong to say here. They are prepared for it. I think Jim Lehrer, the moderator, has said there will be time and question on this. I suspect it is going to eat up a lot of that 90 minutes.

GREGORY: We're going to go to a live shot her on Capital Hill. I think Senate Democrats are preparing to give a statement on the latest in this negotiation that has gone back and forth. We reporters who are assembling in the Senate gallery. We will bring that to you live as it happens.

We are back with Richard Wolffe. This debate matters, it seems to me, because the economic debate, the bailout debate is so important, but politically for Barack Obama, if this issue, the economy is giving him some traction, there is no better time for him to try to eat into the advantage that McCain has on commander in chief question, foreign policy, international affairs. Is that how they view it?

WOLFFE: That is. Look, this debate is the first side by side we are seeing. We all look at these debates about body language, persona, character as it comes through. So who looks more presidential or who crosses the presidential bar? That is really the test here. Yes, Obama is going to be talking about the economy. He's got a double digit lead in polls.

But foreign policy-look, this is McCain's turf here. There is still going to be a good chunk of this time where McCain can press Obama on questions about the surge. Should he have approved it in the first place? Does he regret that decision? So there are opportunities for both sides here. But again, we are going to be looking at that body language, that composure and who looks like they could be president.

GREGORY: McCain said in his interview with Brian Williams, if I take a political hit on this, if I lose an election, I'll take the hit. Same thing he said about supporting the surge. Tom Brokaw called it guerrilla tactics. It has worked for him tactically in this campaign. Barack Obama, it seems to me, has a challenge as well, which is: is he talking about the future? The next president is going to inherit this economic crisis. Is he spending enough time sketching out where he would lead the country and lead the economy, not just how we got into the fix?

WOLFFE: Let's face it. This crisis upends everybody's spending and taxation plans. So, in 40 short days, one of these two men is going to have to deal with a very radically different budget situation. In that sense, you can understand why they are being cautious. They are not going to remake their economic plans within the space of 24 hours. But you are talking broad brush ideas here about McCain wanting lower taxes and Obama looking for middle class tax cuts.

They are not being specific and for good reason, because they really don't know what they are going to find when they get into office next January.

GREGORY: Richard, thanks very much. Richard Wolffe. So that's where we are at the end of this hour. There is still no deal on this bailout package. We are expecting to hear from Senator Obama, who has spoken to reporters. That is going to do it for RACE FOR THE WHITE HOUSE for tonight. We are expecting Senate Democrats to make an announcement at any minute about how the bailout deal will proceed from here. We will cover that for you live. A special edition of "HARDBALL," David Shuster here, 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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