updated 9/26/2008 2:07:20 PM ET 2008-09-26T18:07:20

COUNTDOWN

September 25, 2008

THIS IS A RUSH TRANSCRIPT.

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

Guests: Rahm Emanuel, Chris Hayes, Margaret Carlson

KEITH OLBERMANN, HOST (voice over): Which of these stories will you be talking about tomorrow?

Deal or no deal. Debate or no debate. Did McCain go and screw it up? The photo op meeting, for which the senator pushed as consensus building, instead creates only confusion. A bailout announced in principle, then at the White House Republicans bring up a new plan.

(BEGIN VIDEO CLIP)

SEN. CHRIS DODD, (D) SENATE BANKING COMMITTEE CHAIRMAN: Instead of a rescue plan for the economy, it was for John McCain. This was theater for the last two hours.

(END VIDEO CLIP)

OLBERMANN: The latest on the bailout, the latest on the status of the debate, and the self-inflicted wounds to the McCain campaign, with the Illinois Congressman Rahm Emanuel, Howard Fineman, and Chris Hayes.

Collapse. The second part of the CBS interview with Governor Palin, it makes the first part look like a conversation with Machiavelli.

(BEGIN VIDEO CLIP)

KATIE COURIC, CBS NEWS ANCHOR: You've cited Alaska's proximity to Russia as part of your foreign policy experience. What did you mean by that?

GOV. SARAH PALIN, ® VICE PRESIDENTIAL CANDIDATE: That Alaska has a very narrow maritime border between a foreign country, Russia, and on our other side, the land boundary that we have with Canada. It's funny that a comment like that was kind of made to-I don't know-you know.

(END VIDEO CLIP)

OLBERMANN: But, ultimately, was this the moment the jump the shark moment of the 2008 presidential campaign?

(BEGIN VIDEO CLIP)

DAVID LETTERMAN, TV TALK SHOW HOST: When John McCain-and he was nice enough to call me on the phone and said he was racing back to Washington.

OLBERMANN: Yes.

LETTERMAN: And our people here were told it's so serious, he's getting on a plane immediately and racing back to Washington, and now we've just been told, here take a look. Do we have it on the thing?

OLBERMANN: This just in?

LETTERMAN: This is going live. This-there he is right there.

Doesn't seem to be racing to the airport, does he?

(LAUGHTER)

(END VIDEO CLIP)

OLBERMANN: Never lie to Letterman.

All that and more: Now on COUNTDOWN.

(BEGIN AUDIO CLIP)

LETTERMAN: You need a ride to the airport?

(END AUDIO CLIP)

OLBERMANN (on camera): Good evening. This is Thursday, September 25th, 40 days until the 2008 presidential election.

The bipartisan leadership of the Senate this afternoon reaching fundamental agreement on principles for a bailout bill amid a financial crisis reportedly so urgent that the Republican nominee for president pretending to suspend his campaign just to attend to it, which he might have been able to do it, had he not metaphorically parachuted into the Capitol as the agreement was already being announced.

Our fifth story on the COUNTDOWN: Late this afternoon, House Republicans abandoning that agreement to float, instead, an entirely a new plan, starting over from scratch, the only urgency for House Republicans, the White House, and McCain campaign concerning the bailout seems to be that Senator McCain be seen taking credit for it.

Senator Christopher Dodd, chairman of the banking committee, saying that today's bailout meeting at the White House seemed to have less to do with rescuing Wall Street than it did with rescuing Senator McCain.

(BEGIN VIDEO CLIP)

DODD: We're asked to come down to sort of sit in the room, I've guessed, 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 worked on a plan that the Paulson plan that was set up. We changed it dramatically.

But all of the sudden, to be told this 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. But for the life of me, I don't quite understand what was going on down there except political theater.

(END VIDEO CLIP)

OLBERMANN: The events leading up to the White House matinee, little doubt that politics now trumping the economic necessities of the bailout deals.

Still in New York this morning, at the Clinton Global Initiative-not exactly a nonpolitical event-Senator McCain offering talk, loudly campaigning about how he has suspended his campaign because of the crisis and his urgent need get back to Washington, 18 hours after he first said he was urgently going back there, urgently.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, (R-AZ) PRESIDENTIAL CANDIDATE: I cannot carry on a campaign as though this dangerous situation did not occurred, or as though a solution were at hand, which it clearly is not. As of this morning, I suspended my political campaign, as you know, with so much on the line for America and the world. The debate that matters most right now is taking place in the United States Capitol. And I intend to join it.

(END VIDEO CLIP)

OLBERMANN: Only as we mentioned, Senator McCain arriving back at the Capitol after the agreement he needed to be seen spearheading, had already been announced some 22 hours after he announced he would be suspending his campaign. The flight from LaGuardia to D.C. national airport is an hour and 15 minutes.

Not that his campaign never really was suspended, the "Huffington Post" calling 15 different McCain offices in battleground states across the country today, not one of them saying they had halted operations nor were planning to because of the purported suspension of the campaign. Several, not even aware that the Republican nominee had official stopped campaigning. As of Tuesday, Mr. McCain himself not even aware of what was in the Paulson proposal, all three pages of it.

(BEGIN VIDEO CLIP)

UNIDENTIFIED REPORTER: Would you vote for it as it's presently constructed? Why or why not?

MCCAIN: I have not had a chance to see it in writing. So, I have to examine that.

(END VIDEO CLIP)

OLBERMANN: As if any further proof might have been needed that Senator McCain had been playing politics with this bailout, according to the list of attendees released in advance in today's White House meeting, Senator McCain accompanied by a campaign aide, economic advisor, Douglas "BlackBerry" Holtz-Eakin. Senator Obama accompanied by his legislative counsel, Ian Solomon.

Tonight, after the White House meeting, Senator Obama confirming that posturing and politics trumped helping the American people.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA, (D-IL) PRESIDENTIAL CANDIDATE: What I found, and I think was confirmed today, is that when you inject presidential politics into delicate negotiations, it's not necessarily as helpful as it needs to be. Just because there's a lot of glare in the spotlight, there's the potential for posturing or suspicions.

(END VIDEO CLIP)

OLBERMANN: Time now to call in our own Howard Fineman, also, of course, senior Washington correspondent for "Newsweek" magazine.

Howard, good evening.

HOWARD FINEMAN, NEWSWEEK: Hi, Keith.

OLBERMANN: What happened? A tentative deal at eight minutes to 1:00, then McCain gets there, did the Republicans blow this thing up? Did McCain blow this thing up?

FINEMAN: Well, the thing was sort of blown up, at least, among conservative House Republicans in spite of the deal that was announced at 1:00 o'clock. So, what McCain came back to Washington to parachute into was a revolt within his own party.

And if he really wanted to do something to seal the deal, as he indicated he wanted to, what he needed was go and give a talking to to House Republicans and tell them to get on board. But that was way too dangerous for him to do politically. So, what his presence here actually did was turned a disagreement between House Republicans and the rest of the Congress into an open revolt.

So, rather calm the situation, he inflamed it.

OLBERMANN: So, I'm guessing, with the negotiations schedule, at least, to resume at about 8:00 Eastern Time, did McCain set himself up to be the either, (A), the savior, or (B), the maverick who votes no, or did the thing kind of fall in on top of him?

FINEMAN: I think it's falling in on top of him. He's got to hope now that there will be a deal, even if it results in jamming it down the throats of the conservatives at his own party base, that he spent so much time wooing by picking Sarah Palin, among other things. That he's got to hope for that and he's got to hope that somehow, he can claim victory for making it happened.

But based on what I heard from this meeting today, and I talked to some people who are in there, and lots of people who know about moment by moment, McCain wasn't exerting any leadership there, he was barely a presence in the room. So, it's a little hard to see, you know, how he was acting like John Wayne having just, you know, parachuted on to the deck of the aircraft carrier.

OLBERMANN: So, if he now makes this happen, if it's now what is of the various scenario is the best case scenario left, if he makes it happen, does he lose the conservative base?

FINEMAN: Well, he could well as a matter of fact because the upset about it is genuine, Keith. Among conservatives, they look at this as a $700 billion down payment on the federal government's federalizing of the entire capitalistic economy. They view it on those kinds of apocalyptic terms. Most of the American people have concerns about it as well, maybe not quite as dramatic.

So-I mean, he's in a tough situation here where he's volunteered to leave the charge for something that a lot of the American people have doubts about, and that his party base has tremendous doubts about. But he set himself up for this. And if he doesn't come through with some kind of agreement, he's going to look even sillier than he does right at this minute.

OLBERMANN: One numerical clarification, because you keep hearing this, $700 billion is the value of all the loans that would be involved, all the financial illiquid assets.

FINEMAN: Right.

OLBERMANN: $100 billion is the estimated amount of the ones that are in danger. The $600 billion are actually would not be bad investments for you, me, or the government.

A final question, politically, where do we stand in terms of whatever the goal is tomorrow, having a debate or Senator McCain being able to not have a debate like he didn't have a debate in 2000?

FINEMAN: Well, I think he is trying to let himself out of the corner that he painted himself into. He said a little bit earlier tonight that he's hoping that there will be enough of an agreement that it will allow him to go to Oxford, Mississippi tomorrow night. I think that word-those words, enough of, show that he really knows that he has to show up there tomorrow night.

He can't not do this, because there's going to be 60 million or 70 million people tuning in to see, side by side, for the first time in a general election setting, Barack Obama and John McCain. He can't afford not to be there for that moment.

OLBERMANN: You got to give the people what they want.

Howard Fineman of MSNBC and "Newsweek," thanks for the insight tonight, Howard, of all nights.

FINEMAN: Thank you, Keith.

OLBERMANN: For the perspective from Capitol Hill, let's turn now to Congressman Rahm Emanuel, chairman of the Democratic caucus.

Congressman, thank you for your time especially on this busy evening.

REP. RAHM EMANUEL, (D) ILLINOIS: Thank you.

OLBERMANN: As you understand it, what happened at the White House earlier tonight? What happened to the agreement that was reached by the senators this afternoon? Are we really starting from scratch?

EMANUEL: Oh, we're not going to start from scratch. But what's sad here is that the senator, after there was an agreement, decided to have a little, his own theater. And once you interject presidential politics, you basically have a deal now that got sidetracked and off-track here.

And you don't throw a new idea in, in the ninth inning. I mean, Secretary Paulson said to the Republicans, this was not a non-starter; it was not going to work. And, I think, what's unfortunate is that the senator decided all of the sudden that what he needed for his campaign was more important than what the country needed.

And the country was very clear what we have to do here. You have to balance of what the market needs to get the confidence restored, as well as protecting taxpayers. What he decided was he needed to make some theater, as you clearly have showed in the early part of the show. And, I think, it's actually derailed what was really going on and effectively being pursued by both parties, both chambers, as well as the White House.

OLBERMANN: As of seven hours ago, Mr. Bennett of Utah, the senator, a Republican senator, believed the votes were there in the House to pass that.

EMANUEL: Yes.

OLBERMANN: You're in the House, he is not. Were the votes there and what happens now?

EMANUEL: You know, like-we know this, Keith, but you never know until you kind of put people's, you know-basically, you say, this is what we're going to do and then you're going to start rounding up the votes. As long as that kind of moment or a judgment day is right there, the judgment is right there, you never can tell.

But it's clear that people understand, at least in our caucus, the seriousness of this moment, how-I just left the caucus-how important this moment is in time for America, and that we basically, as Yogi Berra said, when you get to a fork in the road, take it-we have to make this choice. And what we were going to do is that we were ready.

Barney Frank took a proposal by Secretary Paulson, made sure we protect the taxpayers, make sure there was oversight, make sure that, in fact, homeowners who had trouble were actually able to work out their problems and make sure taxpayers got upside if there was turnaround of financial institutions. That improved it, protecting taxpayers, but also providing the assurance to, basically, the financial markets.

And all of the sudden, at the last minute, they decided that it was more important to try to add theater than it was to make progress. And I'm a little bewildered for the maverick here. As you just showed on-you know, as the senator said, he didn't read the proposal. You know, and sometimes I'm taken away this, you know, straight talk express must not have a reading room in it. That be probably the best thing that we can do is put a reading room so he can analyze the three pages.

OLBERMANN: Yes. I was just going to say, we can have, three pages, we could easily, you or I could have read it, (INAUDIBLE) of the issue.

EMANUEL: How about this-for the 22 hours he didn't come down to D.C., he could just have taken it away from the microphones and the cameras and just read it. But, I really-I'm a little-in the name of helping the country and suspending politics, he put politics back in it. In the name of making progress, he stalled it. That's just basically where we are.

OLBERMANN: To that point, this seems to have been, in the last few months, the nature of the campaign the Republicans are running for the White House. Is it, in fact, you know, does it build a crisis workshop? I mean, is this-are these artificial attempts to create white knight situations (INAUDIBLE)?

EMANUEL: You know, I'm getting a little (inaudible) here. But let me say this, Keith, I think, on behalf of the American people, and I've talked to my constituents, I've heard what they have to say, and you'll see a Gallup Poll tomorrow where 80 percent of the American people support achieving something here, of a bailout, and described as a bailout. They have figured this out, I think, in their own way and a very common sense way they've got it figured.

One, a number of people in the financial community were creating instruments, they didn't understand. Second, some, not all, people are buying homes, flipping homes or begetting in homes that they shouldn't have had that were beyond their means. That's what it's called a liar loan. And third, the people they hire to police this, the government, wasn't doing its job making sure the other two were staying honest and true.

And they've got-and that's why they are angry. And they're legitimately angry. They also know the consequences. And they know we have to act. And we were given this proposal, basically, just less than a week ago, at the time we represented our constituents, and got improvements in a piece legislation that was $700 billion with no oversight, no authority. We made changes that protected the taxpayers and improved the legislation. I don't know why in the ninth inning, they've also decided to do this.

OLBERMANN: Well, last question, it's about the ninth inning and the gentleman who arrived in the ninth inning. I know you were not at the White House meeting earlier today, and, obviously, you don't know the stuff that's going on right now. But is it clear to you, from your colleagues, does anybody know what Senator McCain's actual position on this is right now?

EMANUEL: Look, Keith, I think you have to step back. And I don't want, you know, I know Senator McCain, I watched his career. He has been noted for having - making, you know, rush decisions. He, all of a sudden, obviously, he and the campaign, there's a campaign, they made a decision.

I think it was a mistake both by Senator McCain, but I also say, by the White House to take this, that was all the way to until this moment into the White House, was removed to politics to interject -- 40 days to go before a presidential campaign-we're going to invite the presidential candidates here and then say politics isn't part of it. He was actually-we kept the candidates, they are running around the country, expressing to the American people what their views were, setting down their principles, we were doing what we were supposed to do which is legislate.

John McCain proposed his idea, endorsed by the White House, add to the fact, and now all of the sudden, see what the results. I don't think it's more complicated than that.

OLBERMANN: To quote the great political analyst, David Letterman, "Something smells."

(LAUGHTER)

OLBERMANN: Congressman Rahm Emanuel of Illinois, thank you for your time tonight, sir.

EMANUEL: Thank you, Keith.

OLBERMANN: Senator McCain yesterday inactivated his Cincinnatus, recuses himself from the fray ploy, there was no true crisis over the bailout to which he had to urgently attend. The simple question then, with the negotiations in tatters, and the crisis in full flower, did Senator McCain just create the crisis for his own pure political gain? Next.

(COMMERCIAL BREAK)

OLBERMANN: If you need to show leadership but there's crisis to being a leader during, what better stratagem than to create a crisis. Has this been the McCain campaign plan for the last four months and did it just reach its climax this afternoon? And a different McCain crisis he created only in passing, why ditching David Letterman and Letterman's unbridled and powerful response is being compared to the night Walter Cronkite called for us to negotiate our way out of Vietnam and caused Lyndon Johnson to negotiate his way out of the presidency.

You are watching COUNTDOWN on MSNBC.

(COMMERCIAL BREAK)

OLBERMANN: It may take some time to adequately assess just how much Senator John McCain contributed to the ever-changing mess of today's bailout turning suddenly into a craft bailing water. But the senator's non-suspension suspension of his campaign injected presidential politics into this, instead of making the process more bipartisan. And his stanch may still scuttle on actual presidential debate in favor of a false one, full of surrogates and lies.

So in our fourth story on the COUNTDOWN: What does all of it say about his management style-his ability to be a president?

The senator suspended his campaign yesterday, Wednesday, even though just one day earlier, on Tuesday, he admitted to having not even read the three-page bailout proposal from Treasury Secretary Paulson, which should become available the previous Friday. Even though, a little more than a week ago, McCain had said, quote, "The fundamentals of our economy are strong."

What changed, as Ben Smith of Politico.com, suggested were McCain's poll numbers. That sounds cynical consider how this supposedly bold move mirrors McCain's choice of Governor Sarah Palin as his running mate. McCain evidently wanted to shake up his then list of this campaign, and since he could not have Senator Joe Lieberman, his first choice, he went with somebody he had barely met.

We are only now seeing the full implications of that management decision. Thus, the two major decisions of Senator McCain since his party's nominee.

Let's turn to the Washington editor of "The Nation" magazine, Chris Hayes.

Good evening, Chris.

CHRIS HAYES, THE NATION: Good evening, Keith.

OLBERMANN: Is this latest story symptomatic of this term that used before that John McCain built a crisis workshop?

HAYES: Yes. Look-it's exactly that. And to be honest, I'm sort of sympathetic to the people running the McCain campaign. I mean, imagine you're Steve Schmidt or you're Rick Davis, right? You have, in the last eight years, one of the biggest foreign policy blunders in the history of the republic, the Iraq war. You have now a massive financial crisis that people are comparing to the eve of the Great Depression.

So, on foreign policy and domestic policy, you have seen mismanagement and incompetence on an epic scale. And you have a candidate who doesn't disagree with the incumbent on either of those things.

So, what do you run on? I mean, really, what do you run on? We're going to have more Iraq wars and financial meltdowns? You can't do it. You cannot run on your actual platform. There's nothing they can do except for manufacture these crises and try to distract everyone and run out the clock until Election Day.

OLBERMANN: But doesn't there have to be some reality within these crises? I mean, no politics-or he gives a speech this morning to the Clinton Global Initiative. He suspended the campaign but the commercials are still running, the surrogates are still out on every network. It's an emergency, but nine days ago, he thought everything was sound. And two days ago, he hadn't even read the Paulson plan. Whatever this is-is it not mostly show?

HAYES: Absolutely. It's not mostly show, it's entirely show. I mean, at this point, McCain, the gambler, the well-known gambler, is making an all-in bet on the stupidity of the American voter. That is the wager of the campaign at this point-we will be able to fool people long enough that maybe, just maybe, come Election Day, we'll be within striking distance in the polls.

And so, they keep trying to pull rabbits out of hats and manufacture these crises and untether themselves from the actual conditions of the world which are very dire and very important. They try to untether themselves from those as much as possible to have any hope of winning. But it is all show. There's no there there.

OLBERMANN: Broadening this out, lastly, there is the senator's stance on Iraq-the last chance attitude there, the dynamic of having allowed events, his own actions to paint himself into a corner several different times there. What about judgment and what about that word that was previously used about him in another context-temperament to be commander-in-chief. What does all this tell us about those things?

HAYES: I mean, I'm actually kind of flabbergasted. It's really like watching someone who's just groping around in the dark. I, myself, who did not particularly have a tremendously high opinion of the political judgment of John McCain before the last few weeks, have just been so taken aback by how ad hoc and impulsive the whole thing is.

And obviously, there's that the reputation before, but all he does every day is confirmed it. And he confirms it at the expense of any kind of plausible account of how he's going to govern, which is the core of what being the president of the United States would be.

OLBERMANN: Chris Hayes of "The Nation" magazine, many thanks, as always, Chris.

HAYES: Thank you, Keith.

OLBERMANN: Meanwhile, another revised version of the exact role of John McCain's campaign manager in providing paid for access to his candidate-McCain in the Membrane, coming up.

And shocking news about the Republican vice presidential nominee, she's made out of corn?

(COMMERCIAL BREAK)

OLBERMANN: Membrane, in a moment, and the Rick Davis influence-peddling scandal just got worst and sillier.

First, on this date in 1943, one of America's underrated actors was born. Robert Walden has worked almost without pause on TV and in films since 1970, with a star cameo in Paddy Chayefsky's "The Hospital" in 1971, and turn his political dirty tricks to Donald Segretti in "All The Presidents Men," and a thrice Emmy nominated role as a cynical reporter, Joe Rossi on "Lou Grant."

Happy Birthday, Robert Walden.

Let's play Oddball.

And, someplace where Sarah Palin is huge and it's not Alaska, literally huge, a corn field in Whitehouse, Ohio-that's ominous-where a farm owner sketched 16 acres of corn with the face of the Republican nominee for vice president. Some fun facts about the likeness-it took an artist with the tractor eight hours to create the image. That's twice as long as the Senator McCain's vetting process, incidentally.

The maze borders some trees and a road, thus is corn Sarah Palin an expert on forestry and traffic patterns. It is not true that this was to be an action photo of Ms. Palin shooting a moose but the guy ran out of corn.

To Lexington, Kentucky, where we dispel a rumor about an Oddball favorite, the Babe Ruth of getting arrested, Mr. Henry Earl. The 58-year-old man rose to Internet stardom for his vast portfolio of mug shots. It has been widely reported that Earl was pinched on Monday for the 1,000th time.

We're here to say this is not true. According to the SmokingGun.com, Monday was the 1,333rd time Earl was arrested. He was picked up for an old standard, public intoxication. Tuesday, the judge sentenced his name is Earl to 1,000 days in jail, 1,000 days probably ruining any hopes he had of reaching the 2,000 arrest plateau. Now, keep trying.

(END VIDEO CLIP)

OLBERMANN: After the Charlie Gibson interview, after part one of the Katie Couric interview, and especially tonight, after part two of the Katie Couric interviews, the frightening truth seems to be sinking in. Governor Palin does not know what she's talking about.

Meanwhile, her running mate learned why you never, ever lie to Letterman. These stories ahead, but first our newest feature, the most outrageous or untrue thing said by or on behalf of Republican presidential nominee John McCain, McCain in the membrane.

On Sunday, the senator told John Harwood that his campaign manager Rick Davis had ended his business relationship with the failed mortgage giant Freddie Mac years ago. Then the "New York Times" reported it was still going on, with Davis being paid 15 grand a month for access to McCain just a few years ago. So the McCain campaign then claimed the "New York Times" was, quote, 150 percent in the tank for Obama.

Then the Times reported that Freddie Mac's last payment to Davis' company was last month. McCain's people then said Davis had taken a leave from his firm long before that and that the Times had disguised a partisan attack as a news story.

Now comes reporting from "Newsweek Magazine" that, golly, corporate records show that despite his so-called leave, Davis is still treasurer of his company and a corporate director. We are, at this hour, awaiting the McCain campaign's latest statement, in which it's expected to claim that reality is 350 percent in the tank for Obama.

(COMMERCIAL BREAK)

OLBERMANN: The first irreparable crack might have come the day it was first suggested that any governor of Alaska had inherit foreign policy credentials because at the Bering Straight, Alaska is just 53 miles away from Russia. The governor's residence in Juneau is actually only about 130 miles closer to the Russian capital in Moscow than is New York City to Moscow. Reduce that thin gruel to a transparency. In our third story in the COUNTDOWN, in her latest interview, the governor seems to have reduced herself to a punch line. Part two of Sarah Palin's interview with Katie Couric of CBS, and the wheels have fallen off the whole I can see Russia from my house thing.

(BEGIN VIDEO CLIP)

PALIN: Alaska has a very narrow maritime border between a foreign country, Russia, and on our other side the land boundary that we have with Canada. It's funny that a comment like that was kind of made to-I don't know. You know, reporters.

KATIE COURIC, CBS NEWS ANCHOR: Mocked?

PALIN: Mocked, yes. I guess that's the word, yes.

COURIC: Well, explain to me why that enhances your foreign policy credentials.

PALIN Well, it certainly does, because our-our next door neighbors are foreign countries. They're in the state that I am the executive of.

COURIC: Have you ever been involved with any negotiations, for example, with the Russians?

PALIN: We have trade missions back and forth. We do. It's very important when you consider even national security issues with Russia, as Putin rears his head and comes into the air space of the United States of America; where do they go? It's Alaska.

(END VIDEO CLIP)

OLBERMANN: "It's very important when you consider even national security issues of Russia as Putin rears his head and comes in the airspace of the United States; where do they go? It's Alaska. It's just over the border." Airspace, you say. This morning, undeterred after a tour of Ground Zero here in New York City, Governor Palin for the first time took impromptu questions from the media, and was asked what she thinks about how President Bush has handled the war on terror.

(BEGIN VIDEO CLIP)

PALIN: I agree with the Bush administration that we take the fight to them. We never again let them come onto our soil and try to destroy not only our democracy but communities like the community of New York. Never again. So, yes, I do agree with taking the fight to the terrorists and stopping them over there.

(END VIDEO CLIP)

OLBERMANN: So far as we know, the McCain campaign, which has labored to distance itself from all things Bush, even counter-terror, has not commented on that phrase, "I agree with the Bush administration."

Pleasure as always to be joined by Margaret Carlson, political columnist at "Bloomberg News," Washington editor of "The Week Magazine." Good evening, Margaret.

MARGARET CARLSON, "BLOOMBERG NEWS": Good evening, Keith.

OLBERMANN: Let me ask this flatly. Is this candidate still plausible or has she now moved to something closer like self destruction?

CARLSON: Keith, I can see the White House from the third floor of my house, but I don't think I'm capable of being president, vice president or, you know, even a clerk. So that line gets repeated again and again like the Bridge to Nowhere, I'm against it. It's-it boggles the mind because you can't keep saying something that has no meaning. It's like being Alice in Wonderland.

So I think she has crossed a line, and I now see why she was kept under wraps, because today has not been a good day. The Katie Couric was not good and these moments today where she's allowed to talk to reporters finally. It doesn't make any sense what she says and the idea-I'm afraid to say this, Keith, because I'm going to be accused of being elite, and not just Democrats, but the media has been cowed into being afraid of that. But I don't mean to be condescending, but it's an insult to small town people to say that Sarah Palin represents them and, therefore, the way that she deals with reporters and the questions and her mastery of the facts, that's a bad reflection on small towns in this country.

I'm from a small town in Pennsylvania, and I don't think that's who we are and I don't think that's what people want in a vice president, especially one that's a vice president to a man who's 72 years old.

OLBERMANN: Is the base support still there? Or are they seeing her -beginning to see her as a liability?

CARLSON: Well, the poll numbers are going in the wrong direction for Governor Palin. And so to that extent, I think there's some-she's not wearing well. As the novelty goes down and the light shines on her, she has not gone up in the public's estimation, even among the people that she was chosen to excite. Some of that excitement, as they get to know her, is going down.

The McCain campaign is so good at changing the subject. They change the subject by, oh, maybe we won't have a convention. We have a hurricane. Maybe we won't have a debate. We have a financial crisis. Maybe I'll name this unknown governor from Alaska. That will get people talking about me in ways that are favorable for a while. Just to do anything not to talk about Rick Davis and Freddie and Fannie Mae, not to talk about the financial crisis in its essence, which he doesn't know that much about. Just get back to the novelty item. And that's where we'll have the discussion, not on the substance of whether McCain knows the economy and whether he showed good judgment in whom he chose for his vice president.

OLBERMANN: Is the problem with novelty in an interview such as the one we just saw, that one clip about Alaska, to use the old line from the Monty Python sketch, she sort of got lost in that sentence and kind of gave up. And, you know, if you or I were on the air and we did that, it would look kind of foolish, but neither of us is responsible at any point for any sort of governmental responsibilities, even a small town or a small state. That was kind of a frightening thing to see. I'm speaking in terms of the nation.

CARLSON: Keith, I don't want to see a transcript of this interview. However, I don't think-I think I have nouns, verbs, prepositions and objects. And when you listen to Sarah Palin, these things are out of order. There are about five things she says. Take the fight to them, mission, don't blink, maverick, he's been fighting all these years for you, and these are the things that keep coming up. The end of the Katie Couric interview, Katie pressed her on just tell me what in fact has he done that makes him a maverick? It went back and forth. She couldn't come up with anything. And she said, I'll get back to you on that. So-

OLBERMANN: Yes, leave a self addressed stamped envelope and we'll send it to you. This is what finally struck me, it sounds like a game of Mad Libs and you're filling in certain series of blanks.

CARLSON: I'll be getting a lot of mail from people tomorrow saying how could you say this, how condescending. But I don't think that the media needs to be cowed by Karl Rove.

OLBERMANN: No, it's not condescending. It's fearful. There's a difference and an important difference for the country. Margaret Carlson of "Bloomberg News." Bring half of them over to me, I'll look at them myself.

CARLSON: Thanks, Keith.

OLBERMANN: Thank you. Why the McCain campaign should never have let this happen. Not that I said anything of note. It was Mr. Letterman who today actually was compared to Walter Cronkite in this equation.

Here's a surprise. Steve Doocy declares that what happened to John McCain prior to 1992 should only be on the History Channel. What happened to him before 1992 that he always mentions? What was that again? Worst persons next on COUNTDOWN.

(COMMERCIAL BREAK)

OLBERMANN: One independent political website compared it to Walter Cronkite, 40 years ago, suddenly urging an end to the Vietnam War. By bailing out on David Letterman and lying to him about it, did John McCain unleash a force that might cost him a shot at victory? That's ahead, but first time for COUNTDOWN's number two story, tonight's worst persons in the world.

The bronze to Neal Cavuto of Fixed News, also to receive a special citation for worst timing in the world. Mr. Cavuto's bit on Monday, still posted on his website, is entitled "You Multi-task Under Pressure, So Why Can't Congress?" This one is a rationalization demanding a pro-drilling vote by Congress. Quoting it, "countless Americans juggle big issues too. They'd love to punt on paying the bills or sending the kids off to school or postponing a big family project. I'm sure they'd love to table a difficult financial undertaking, but they can't. They don't. They won't. Congress, you could learn a thing or two from the folks who elected you.

It's called discipline. It's called life."

Do you want to tell Neal about John McCain saying he can't campaign and, at the same time, be one of the 100 senators addressing the fiscal crisis or should I?

The runner up, a combined intercontinental win by Sausages and hot dogs. Thomas Souderman (ph), chief weatherman at air traffic control in Stockholm caused the building to be evacuated and nearly caused the airport to be closed when he tried to cook, quote, a nice fatty sausage from Tuscany and set off the fire alarm.

Meanwhile, the Philadelphia Phillies park was evacuated after somebody found what they thought were pipe bombs wrapped up in duct tape. It turned out they were hot dogs wrapped up in duct tape, left over from a stunt in which the Phillies mascot fires hot dogs wrapped up in duct tape into the crowd using a bazooka like device. They evacuated the ballpark for this. But nobody's worried about a guy in a costume carrying a bazooka-like device.

But our winner, the bottomless pit that is Steve Doocy of Fox Noise. When a guest remembered that John McCain had a different role in the last greed-induced financial panic in the country, namely as one of the five in the Keating Five, Doocy went haywire. He told the guest to pipe down. Then he described him as rude. Then insisted that he cut it out.

Whereupon a producer could be overheard saying cut his mike.

Look, we all know what Fox News is. We all know what "Fox and Friends" is. You get three not very bright people. You feed them really intriguing sounding stuff that you have made up. And you tell them you are confiding in them by doing so. And they'll enthusiastically spout any nonsense you want them to and they'll think it was their idea to do so.

So Doocy isn't on here because he tried to shout down all mention of the Keating Five. That's his job. It's because of what he said as the guest got in one last reference to McCain's Keating Five scandal, quote, "This is not the History Channel." So stuff from 1991 is too old, too remote, as the lawyers say. Meaning you guys think John McCain's POW experience from the '60s should only be covered by the History Channel? Because, if you're going to discount what he went through in Vietnam, Steve, I'm afraid I have to ask you to step outside.

Steve "nothing before 1992 counts" Doocy, today's worst person in the world!

(COMMERCIAL BREAK)

OLBERMANN: In understanding the relevance of John McCain's non-appearance on "Late Night with David Letterman" last night, there's one paramount fact about one of the nights he did make it, February 28th, 2007. That is when and where John McCain announced he was running for president. Our number one story on the COUNTDOWN, in absentia, what McCain said and did not say to Letterman may ultimately prove to have been more important than the time he told him he was announcing his candidacy.

Letterman says McCain called him personally after 3:00 p.m. yesterday to explain his own bailout, said he was rushing to the airport to get back to Washington, suspending the campaign. But in the middle of the taping of the show, Letterman was advised, to his great surprise, that McCain had not gone to D.C. but instead to 57th street to tape a different interview with the same network without telling Letterman or anybody at his show.

The worst was yet to come. McCain didn't even go to Washington after the interview with Katie Couric. He was still in New York and campaigning at the Clinton Global Initiative this morning, hours after a McCain spokesperson revealed McCain's story to Letterman was simply a lie.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I think we felt this wasn't a night for comedy.

David Letterman is, at all hours, very funny and humorous.

(END VIDEO CLIP)

OLBERMANN: Two more points here. First, Letterman is not some comic hack. When the subject was raised during the taping yesterday that maybe McCain's handlers didn't want McCain to seem funny, Letterman's producers pointed out that he has repeatedly conducted in-depth serious interviews with news makers of the days, certainly would have done so last night.

Second, if comedy during a time of national crisis was the issue, then why did Senator McCain appear on "Late Night With Conan O'Brien" on Monday, August 29, 2005, the evening of the same day he celebrated his birthday with President Bush with a nice big cake, the same day that the levees were breached in New Orleans after Hurricane Katrina struck.

So even ignoring the conspiracy theory about McCain switching Couric to off-set Governor Palin's disastrous interview with Couric, even ignoring that because of the late cancellation by McCain, Letterman needed a fill-in guest literally in the neighborhood and that turned out to be me, the last person they wanted out there. What they got by not being honest with Letterman was perhaps the sharpest, certainly the most persistent political satire and criticism of the campaign. By my count, 31 separate blasts, some of them here.

(BEGIN VIDEO CLIP)

DAVID LETTERMAN, "THE LATE SHOW WITH DAVID LETTERMAN": Maybe you heard the big news, John McCain, Senator John McCain, Republican candidate for president, was supposed to be on the program tonight. Were you aware of that? Yes. But he had to cancel the show because he is suspending his campaign because the economy is exploding.

You know John McCain, he's the running mate of Sarah Palin. You're aware of that.

John McCain calls up and says, I'm not going to be there, kids, because everything is going to hell, and here's the funny part, nobody told his vice presidential candidate Sarah Palin. And honest to god, right now she's still circling the theater in the white mini-van.

When you call up and you call up at the last minute and you cancel a show, ladies and gentlemen, that's starting to smell. I mean, this-this is not the John McCain I know, by god. But you heard it here first. This doesn't smell right. You know, this just doesn't smell right, because this is not the way a tested hero behaves. Somebody's putting something in his Metamucil.

Let's say there's a time of crisis, and the poor guy-he is a little older. He's about my age. And then Sarah Palin takes over as president. Well, she ought to be ready because she's handled crises like this in the past. Oh, wait a minute, she really hasn't handled a crises like this.

Suspending the campaign.

UNIDENTIFIED MALE: Yes.

LETTERMAN: Are we suspending it because there's an economic crisis or because the poll numbers are sliding.

I don't mean to cut into your time-

OLBERMANN: No, please.

LETTERMAN: Your generous visit. When John McCain-and he was nice enough to call me and said he was racing back to Washington. Our people here were told, so serious, he's getting on a plane immediately and racing back to Washington. And now we've just been told-here take a look. Do we have it on the thing? This is going live. There he is right there. Doesn't seem to be racing to the airport, does he?

This just gets uglier and uglier. I'm feeling bad for the man to have participated in this.

Let's see what he has to say. This will be interesting. I wonder if he'll mention me. Hey, John, I got a question. You need a ride to the airport?

OLBERMANN: I think he dissed you.

LETTERMAN: Yes, absolutely.

OLBERMANN: Unless, unless her first question is, senator, why did you cancel on Dave? Now, then-

LETTERMAN: That will be the first question.

OLBERMANN: Or the other possibility is that she has all the money that's required to fix the economy.

LETTERMAN: I don't want to keep beating this thing, but it's just-

OLBERMANN: Yes, you do.

LETTERMAN: It really is starting to smell now, because-he says to me on the phone-I took a phone call from John McCain. A lot of senators don't call me.

OLBERMANN: Yes, I know. It's a thrill.

LETTERMAN: I felt like as part of the national good, I understand. I said, good luck. Thank you for being attendant to the cause. He said, maybe next time I'll come in. I'll bring Sarah Palin. I said, fine, whatever you need to do. That's just fine. He said, yes, we're going to go save the country. It's like we caught him getting a manicure or something.

We're told now that the senator has concluded his interview with Katie Couric and he's now on Rachel Ray's show making veal piccata.

(END VIDEO CLIP)

OLBERMANN: Et cetera, et cetera, et cetera. It was like sitting next to Wellington as he defeated Napoleon at Waterloo. Do not dismiss the importance of David Letterman. His audience is large. It is intelligent. And it is fiercely loyal to him. Lie to Dave and you're lying to them. The website the "Washington Independent" even offered a comparison between Letterman's smell test and Walter Cronkite's famous appraisal of Vietnam in 1968 that led President Johnson to quit his bid for reelection, "perhaps," they wrote, "McCain won't say if I've lost Letterman, I've lost middle America. But one wouldn't be surprised if the Republican candidate began to smell a strong odor seeping into the vents of the Straight Talk Express."

And one post script, the ever entertaining Craig Ferguson of "The Late, Late Show," his show opener immediately following Letterman's hour.

(BEGIN VIDEO CLIP)

CRAIG FERGUSON, "THE LATE, LATE SHOW": Good evening. I'm afraid I have some bad news. We had a guest who was scheduled to appear on our show tonight, but he had to cancel. Keith Olbermann apparently had something else to do tonight. He was meant to be here and then suddenly at the last minute, got a better offer! Curse you, Olbermann and your availability to David Letterman.

(END VIDEO CLIP)

OLBERMANN: I'm only one man. I can only help CBS one hour at a time. With all that, though, perhaps the only thing John McCain actually managed to suspend last night was his own credibility.

That's COUNTDOWN for this the 1,975th day since the declaration of mission accomplished in Iraq. A quick programming reminder: the first presidential debate, scheduled for tomorrow night. Check your late listings tomorrow. We'll have a COUNTDOWN to the debate tomorrow at 8:00 Eastern or a COUNTDOWN not to the debate 8:00 Eastern. We'll be here even if he ain't there.

After the whatever, we'll have a COUNTDOWN post-debate special live at 11:00 p.m. Eastern. I'm Keith Olbermann, good night and good luck.

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

END

Copy: Content and programming copyright 2008 MSNBC. ALL RIGHTS RESERVED. Transcription Copyright 2008 ASC LLC ALL RIGHTS RESERVED. No license is granted to the user of this material other than for research. User may not reproduce or redistribute the material except for user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon MSNBC and ASC LLC's copyright or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.

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