updated 9/30/2008 1:38:19 PM ET 2008-09-30T17:38:19

Guests: Erin Burnett, Pat Buchanan, Harold Ford, Jr., John Culberson, Sheila Jackson Lee, Robert Reich, Chris Shays, Tom Price, Lawrence O'Donnell

DAVID GREGORY, HOST: Tonight, when Washington doesn't work. In the middle of a financial crisis, a huge bailout plan for Wall Street surprisingly fails in the House. The markets melt. The Dow closes down almost 800 points.So what happens now? And are Senators McCain and Obama the key to the solution? That and more as RACE FOR THE WHITE HOUSE rolls on. Thirty-six days to go in the race for the White House. Welcome to the program. I'm David Gregory. My headline tonight, "Bust and Blame."

The Dow Jones sank almost 800 points this afternoon. It's the single biggest point drop in history after the final vote shocked markets around the world. That vote in the House. Here was the total. Two hundred and five voted yea, 228 voted nay. The party breakdown illustrates just how unpopular the measure was across both aisles. Ninety-five Democrats voted against this bill, as did 133 Republicans. After the failure, the blame. Republican leaders argued House Speaker Nancy Pelosi poisoned the waters with a partisan speech before the bailout vote.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER ®, MINORITY LEADER: The speaker had to give a partisan voice that poisoned our conference, caused a number of members who we thought we could get to go south. At the end of the day, this is not about Democrats and Republicans. It's about our economy and what's best for the American people.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

REP. BARNEY FRANK (D), MASSACHUSETTS: Here's the story. There's a terrible crisis affecting the American economy. We have come together on a bill to alleviate the crisis. And because somebody hurt their feelings, they decide to punish the country.

(END VIDEO CLIP)

GREGORY: Meantime at the White House, a grim-faced President Bush responded.

(BEGIN VIDEO CLIP)

GEORGE. W. BUSH, PRESIDENT OF THE UNITED STATES: On the economic rescue plan, we put forth a plan that was big because we've got a big problem. I'm going to be talking to my economic advisers after my meeting here with the president, and we're working with members of Congress, leaders of Congress on a way forward.

(END VIDEO CLIP)

GREGORY: Congressional leaders said late today, they will come together late again Thursday, after the Jewish new year, to try to reach a deal. And less than two hours ago, an obviously shaken treasury secretary, Henry Paulson, underlined the stakes of inaction.

(BEGIN VIDEO CLIP)

HENRY PAULSON, TREASURY SECRETARY: Markets around the world are under stress. And that reduces the availability of credit that businesses across America depend on to meet payroll and to purchase inventories. Families, too, feel the credit crunch, as it becomes more difficult to get car loans or a student loan.

(END VIDEO CLIP)

GREGORY: Joining me now, Erin Burnett, anchor of CNBC's "Street Signs" and "Squawk on the Street."

A tough day, Erin. A lot of people watching this just wondering what it all means.

ERIN BURNETT, HOST, "STREET SIGNS": I have to say, David, this was one of the most incredible days we have had on Wall Street. I was sitting there today on CNBC, and the expectation, as you know, is was that this would pass. Everyone had been assured that it would pass. And the votes started to tally as we were sitting there, and all of a sudden, it dawned on us and started to dawn on the market that it just wasn't going to happen. And at that point, you started to see the market react.

The market then had hoped that some people might switch their votes. That didn't happen, and that's why you ended up with the single worst point drop ever.

GREGORY: Right.

BURNETT: This the worst percentage decline that we've seen since September 17, 2001. The market was shocked and the market needed this. That truly is the truth.

GREGORY: And so the question then is, what happens if you continue to go days even without this bailout plan? It is a crisis of confidence, we keep being told. So what does that actually mean?

BURNETT: I have put that question to several people today, to a couple of bankers, a couple of CEOs, even off the record, as well as to some of the biggest investors out there. All of them are in agreement on one thing, David, and that is we don't have much time. There was one outlier, actually. One of the biggest private equity investors in the country who told me, I think we have a week or two before we have "Armageddon." Most of the others felt we really had a few days. And that is because even in a system as complex and as proud and successful as our financial system, every single financial transaction comes down to a borrower trusting a lender and vice versa. And that trust is what has broken down all the way across the system. Some banking CEOs that I spoke to today said we are starting to see across the country examples of small businesses unable to get the short-term funding that they use for simple things like getting inventory or paying payroll. So far, those incidences appear to be isolated, but that is the direction that we are headed in. So this plan may not be perfect, David, but right now, it's what we have. It is better than nothing, and it is better than the alternative.

GREGORY: All right. Erin Burnett at CNBC. A lot more to cover on this. Erin, I know you'll be with us. Thank you very much. I want to play a little bit of sound from Senator McCain. Both candidates reacted to all this, of course, as the day went on. Senator McCain late today on the offense. Listen.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN ®, PRESIDENTIAL CANDIDATE: Our leaders are expected to leave partisanship at the door and come to the table to solve our problems. Senator Obama and his allies in Congress infused unnecessary partisanship into the process.

Now is not the time to fix the blame. It's time to fix the problem. I would hope that all our leaders, all of them, can put aside short-term political goals.

(END VIDEO CLIP)

GREGORY: We'll hear from Senator Obama just a little bit later.

Let me get some first thoughts from the panel tonight-Pat Buchanan, former presidential candidate, MSNBC analyst, of course; Harold Ford, Jr., MSNBC political analyst and chairman of the Democratic Leadership Council.

Pat, I'll start with you. What do you make of all this?

PAT BUCHANAN, MSNBC POLITICAL ANALYST: Well, what we lost today on the market was, you know, the bailout is $700 billion. More than that was wiped out of equity in the American markets alone today. What I make of this is the Republicans, and some Democrats, quite frankly, really believe this is a rotten deal. It is a bailout of crooked, corrupt, greedy people on Wall Street at the expense of middle America. I believe, by and large, folks voted their convictions. I don't think the sale of this package has been effective. We have not been told it is definitely going to work. And I think that's why these folks voted that way. My guess would be this, David, that maybe they're going to have to wait until after the Jewish holidays, but by Wednesday, if the markets keep going down, I think you'll probably get the votes then. My fear is not so much the little businesses as of today, but really an international financial crash of this week.

GREGORY: Harold, this was striking. I said at the top, when Washington doesn't work, nothing worked in Washington. Not a Democratic speaker, not the Republican minority, not a Republican presidential candidate, not a Democratic presidential candidate, not a White House. Nothing worked here to get this done.

HAROLD FORD, JR. MSNBC POLITICAL ANALYST: This has been a bad day for Washington and a bad day for American politics. If you're watching this from afar, you have to wonder, what was the Congress thinking about? Republicans promising votes, Democrats promising votes. I'm a Democrat and I'm a proud Democrat. But today was an important day. I disagree with Pat in this regard-this is about jobs and small businesses and pensions. There are a lot of people who got us into this problem. There's a lot of blame to go around. But when you show up on the scene of an accident and your child has been the driver and is hurt, and the police or someone walks over and tells you there may have been alcohol involved, that they smell it, you don't scold or beat your child. You get your child to the hospital. You deal with the problem. And then you deal with the other issues later. What happened today was an embarrassment for the country. And I just hope that my friends, my old colleagues and my dear, dear friends in the Congress can come back together very, very soon, shortly after this holiday, after celebrating the new year for my Jewish friends, and do something on behalf not only of, as they say, Wall Street, this has very little to do with Wall Street. This is about Main Street. And before we begin to hear the cries and the screams and the howls, they should act. In addition, if I could add one other thing, David, they ought to raise these FDIC limits right away to $500,000. If we want to stop the run from Main Street on the money markets and banks, we should do that right away before we begin addressing some of these longer-term complex asset issues.

GREGORY: Right.

BUCHANAN: Ultimately, David...

GREGORY: I should point out, former Treasury Secretary Lawrence Summers indicated in a piece he wrote today that he didn't think there was any real danger of a run on the banks that would overwhelm the FDIC.

But Pat, I just want to keep with Harold for one second.

BUCHANAN: Right.

GREGORY: How is it that a Democratic speaker who is in control here puts a bill on the floor that she is not certain there are adequate number of votes for.

BUCHANAN: Well, that's massive incompetence on the part of the speaker of the House. And her statements were utterly foolish and partisan. They do not justify someone voting against what he perceives to be the national interests. Let me disagree with Harold to this extent, there is no question that, ultimately, this is going to come right down to Main Street if there's a gigantic crash. But I think that gigantic crash is the immediate danger. What this is, David, is a vote by the members of the Congress, reflecting the views of their constituents, who have no confidence in the government of the United States. Not in Congress. Not in Paulson. Not in the president.

GREGORY: All right. Let me just interrupt for a second. Held the thought, Harold, because I want to go to Congress while I have them. Joining me now, two members of Congress who voted against the bailout package today, John Culberson, Republican congressman from Texas, and Sheila Jackson Lee, a Democratic congresswoman, also from Texas. Congressman, I'll start with you. How come?

REP. JOHN CULBERSON ®, TEXAS: Well, this is a matter of principle. For me today, as a fiscal conservative, I first of all want to make sure that the country knows that we're all working together to try to get this resolved as quickly as we can. But the bill before us today, in my opinion, was simply unaffordable. I did not want to vote to add $700 billion of debt to our kids' burden in order to bail out some investment banks on Wall Street that made bad decisions when there is a far better free market alternative that we put together as fiscal conservatives in the House. This was a matter of principle today. And we've got time to deal with this in a thoughtful, careful way. This was just the wrong bill today, too big and too expensive. And I'm not sure it would have worked.

GREGORY: But Congressman, the Dow Jones, Wall Street certainly told you today that time is of the essence.

CULBERSON: Absolutely.

GREGORY: And then you vote down something like this, and that there is real economic danger.

CULBERSON: Absolutely.

GREGORY: Aren't you afraid of the consequences?

CULBERSON: Well, we need-my rule has always been to do the right thing for the right reasons, and legislate for the next generation and not try to-if we're always thinking about the next election, that's going to cloud our thinking. We need to be careful and thoughtful. Congress is going to take this carefully and thoughtfully. I'm committed to finding a solution quickly that's going to deal with this economic problem. And we're going to make sure that listeners out there know that their Congress is going to work. I expect us to be back here Thursday night, Friday, certainly, to pass a bill out. And we're going to find that reasonable middle ground working together for the best interest of the nation.

GREGORY: OK. Congresswoman, why did you vote against it?

REP. SHEILA JACKSON LEE (D), TEXAS: Well, first of all, David, hello to my good friends there. And I might say that we exercised democracy here. We exercised the view of making sure that Mr. and Mrs. Main Street would be represented in this bill.

And then let me just say-and my good friend is standing next to me Senator McCain came in and indicated that he had brokered a deal, that he had the votes. Speaker Pelosi put 140 votes on the table. We had a difference of opinion. But the Republicans only put 65 on the table. So we've got to come together.

GREGORY: All right. But what did you disagree with? What did you disagree with?

LEE: Well, what I disagreed with, frankly, was the unbridled power that was given to Secretary Paulson, the enormity of the amount of money, and no money set aside for Mr. and Mrs. Main Street. Yes, some portions of the bill dealt with the mortgage foreclosure. But if your mortgage happened to be in the hands of investors, you couldn't settle it unless you had every single investor signing off on the restructuring. The lank of bankruptcy provision that I think could have been modified to accommodate all concerns, and the lack of enforcement, all of the boards (ph) that were put in the bill, there were not enforcement powers. Judicial review was limited. Can you imagine that the judicial review was prohibited for certain acts of the secretary?

GREGORY: All right.

LEE: I believe that we can work on this. But the Democrats put their numbers on the board. Speaker Pelosi was a fantastic negotiator. The leadership worked with all people. And frankly, I believe that we can save this and we can do it by the end of the week.

GREGORY: All right. Well, look, we're going to have to make that the last word. Thanks to both of you for sharing some of your thoughts in voting against the bill today.

LEE: Thank you.

GREGORY: Congressman Culberson and Congresswoman Sheila Jackson Lee.

Coming next on the program, can either candidate get us out of this financial mess? I'm going to talk to former Clinton labor secretary Robert Reich right after this break. Don't go away.

(COMMERCIAL BREAK)

GREGORY: Back now on RACE FOR THE WHITE HOUSE.

What do today's disastrous events mean for your economic future?

Joining me now is Obama supporter Robert Reich, who was secretary of Labor under President Clinton. And Mr. Reich is a professor of public policy at the University of California Berkeley, and the author of "Supercapitalism: The Transformation of Business, Democracy and Everyday Life." Secretary Reich, welcome.

ROBERT REICH, FMR. LABOR SECRETARY: Thank you, David.

David, this is not economic Armageddon. Maybe those are the most reassuring words I can give you.

GREGORY: What does it mean then today?

REICH: Well, it means that consumers are likely to have a harder time getting credit if there is no bailout package. And by the way, I think there will be a bailout package. But if there's no bailout package, consumers will have a harder time getting credit in the future, borrowing money, and businesses may have a harder time borrowing money. And that will slow the economy down even further. But look, either way, the sad news, the unfortunate news, David, is that we're probably going to be in a deep recession next year, bailout or no bailout.

GREGORY: And just a function of what we've been going through the past year and a half? And beyond?

REICH: No, it really goes deeper than that. When housing prices started to drop about a year and a half, two years ago, a lot of consumers no longer had the piggybank that they used to have in terms of refinancing their homes or getting home equity loans. You know, that really was a source of keeping the economy going because wages weren't going up, incomes were not going up. Most consumers actually, if you look at family income, are worse off today than they were seven or eight years ago. But as long as they could borrow against their homes, they were doing fine. When that ended, when those piggybanks closed, when housing prices started to go down, that's when things started to really slow down. So, regardless of what happens to Wall Street, Main Street is in trouble.

GREGORY: Right.

And the question is, is this really the answer? This is a complicated bill to understand, made more complicated by some of the oversight and other provisions that are now included in this bill. But basically, it's a big fat loan to troubled investment banks with the idea of opening up the credit markets.

Is this the way to do it?

REICH: Well, something big had to be done. I think this is more psychological. Or maybe you say psychotherapy for credit markets, for global capital markets, than it is anything else.

Something big had to be done. The Treasury secretary and Ben Bernanke, the chair of the Fed, thought something big represented $700 billion to $1 trillion. It would be loans and it would also be equity, direct investments in those companies, to some extent.

GREGORY: Right.

REICH: But look, the public thinks this is a stupid idea. I mean, I've been talking to members of Congress all day, and they've said that mail, e-mail and letters and phone calls have been running 20 or 30-1 against this. And so it's not surprising that members of Congress, particularly the majority of the House, which is, all of them are up for reelection in just five weeks. They said no.

GREGORY: Right. Well, OK, but let's talk about leadership, Secretary Reich.

I mean, here you've got a president who is very unpopular and is not in a very good position to have this plan sold on Capitol Hill, and he's got a treasury secretary who, by most accounts, has not made the sale either. So here are two presidential candidates who have the nation's attention, tens of millions of people watching on Friday night. Did they come up short in laying out both the stakes and the prescription for how we get out of this?

REICH: Well, neither one of them, Barack Obama nor John McCain, wanted to get in front of Congress, because after all, this is Congress' responsibility. This is the administration's albatross. This happened on George Bush's watch. And I think neither candidate wanted to intrude politics and the presidential politics on this process. Now the process has blown up. I mean, John McCain, I'm afraid, has some explaining to do, because remember, he suspended his campaign, went down, called that meeting, made sure that Obama was at that meeting with the president. And the House Republicans that he represented are the ones who did not vote for this particular measure today.

GREGORY: Well, but let's remember, Secretary Reich, that there were 95 Democrats who didn't vote for this either, and maybe the hands-off approach by Senator Obama caused some of them to feel like they had some cover.

REICH: You know, David, the problem is that you could never get the Democrats alone to take responsibility for this wildly unpopular bill. They had to have Republican support. And Nancy Pelosi made absolutely clear to John Boehner that she was not going to put the Democrats in the position of supporting this incredibly unpopular bill unless a majority of Republicans went along. So you had to have both parties together, and that did not happen.

GREGORY: What do you worry about?

REICH: Well, I'm worried right now that there will be no bailout bill, and world confidence in the dollar, world confidence in American financial markets will plummet. And as a result, the dollar will drop. As a result, everything we buy from abroad will cost more. And the entire financial system will kind of grind, not to a halt-it's not going to halt, but it will get slower and slower and slower.

Again, this is not economic Armageddon. This is not the end of the world. I think that if a bill passes in some fashion over the next week, it will be fine. Even if it's $150 billion, the first installment. That's OK.

GREGORY: All right. A good way to end.

Secretary Robert Reich, thanks very much for coming on tonight.

REICH: Thanks, David.

GREGORY: And coming next, Obama spoke to supporters just minutes after the bailout failed to pass the House. What he told a crowd in Colorado coming next.

(COMMERCIAL BREAK)

GREGORY: Back now on RACE FOR THE WHITE HOUSE.

Senator Obama was late taking the stage at an event in Colorado this afternoon because he was talking to House Speaker Nancy Pelosi and Treasury Secretary Henry Paulson about that failed bailout bill. Here's what he told the crowd afterward.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: There are going to be some bumps and trials and tribulations and ups and downs before we get this rescue package done. It's important for the American public and for the markets to stay calm, because things are never smooth in Congress, and to understand that it will get done.

(END VIDEO CLIP)

GREGORY: Just a few minutes here, but I want to get back to the panel, CNBC's Erin Burnett; MSNBC analyst, Pat Buchanan; and former congressman Harold Ford, Jr.

Harold, you saw Senator McCain earlier saying it was Obama and his allies who have infused partisanship into this process. What do you say?

FORD: John McCain ought to be careful. He is starting to deserve a lot of the criticism that's coming his way for coming back and injecting himself.

He must remember, it was his party, it was John Boehner, the Republican leader, who promised half the votes for this. And then to blame Nancy Pelosi for giving a partisan speech on the floor, I was in Congress for 10 years. I didn't hear many speech on the floor that were not partisan given by Republicans and Democrats.For a few of my Republican friends to have their feelings bruised by the speaker's comments, to not pass a piece of legislation that we've now seen cause the market to drop 800 points, shame on that leadership. Shame not only on John Boehner, but John McCain to criticize Democrats and Barack Obama when he went back and failed? I don't think the country's going to buy it.

GREGORY: All right. But Pat, the question for Barack Obama is, what role does he play between now and passage, if it comes to that? Does he play a leadership role? Does he try to get-there are 95 Democrats who didn't vote for this.

BUCHANAN: No, he doesn't want to play a leadership role. He just wants this to go through. He is benefiting from all of this.

But let me say in response to Harold, come on now. The Democratic Party and Ms. Pelosi said, unless we get cover from so many Republicans, we're not going to pass what we think is vital in the national interest. Then she gets...

FORD: Pat...

BUCHANAN: ... up at the close of the debate-hold it-and delivers this partisan, nasty speech.

Now, I don't condone any Republican who used that excuse to vote against it. But Harold, philosophically, you know those conservatives like that one we just talked to. They are voting against this on principle. They are voting against it because they agree with their constituents, 30-1 who are against this package. They think it's a bailout. They think there is a better deal. I think many of these Republicans and some Democrats voted on principle against it.

FORD: But Pat, you can't have it both ways. You can't say you're not going to defend them for not voting because they claimed that Ms. Pelosi bruised their feelings, or offended them, and at the same time, say that it was a problem. I served for 10 years there. I can assure you, that wasn't the first partisan speech given on the floor of the House of Representatives by a Democrat or a Republican. When the economic future, when the financial market that we know is capitalism is at stake, or I should say major questions have been raised...

(CROSSTALK)

BUCHANAN: Harold-I agree with you, Harold.

FORD: You have to ask the question, why didn't they do it?

GREGORY: I've got to get in here. I've got to get to a break.

BUCHANAN: Harold, I agree with you. They used Pelosi as an excuse. I agree with you. But Pelosi trying to say we need Republican cover is preposterous for a leader.

GREGORY: All right. Got to take a break here. These guys will continue even after the break. That's what they do.

The failure to pass the bailout package caused the markets to plunge today. Coming up next, I'm going to talk to two Republicans who came down on different sides of the bailout bill. And the question, if they're going to get passage, how are they going to get Republicans to vote for it? When we come back on THE RACE after this.

(COMMERCIAL BREAK)

GREGORY: The bail out bill goes down in defeat and the stock market plunges with its worst one day point drop in history. And in the meantime, the RACE FOR THE WHITE HOUSE slows to a political crawl.

Welcome back to THE RACE. I'm David Gregory, time for the back half. Today's defeat of the bail out bill was notable not only for its bipartisan opposition, but also for its bipartisan support. One of the Republican Congressmen who voted for the bill was Chris Shays of Connecticut. He joins me now from Capital Hill. Congressman, what happened today?

REP. CHRIS SHAYS ®, CONNECTICUT: You had people who disagreed with the legislation. I supported it. I didn't want to play Russian Roulette. While I don't think it will be 1929, in this environment, we need get liquidity in the marketplace. I felt the bill was a compromise. I felt that tax payers, in fact, would be buying bad debt, but at a discount, in some cases, bargain basement prices. I thought we would make money that way. And I thought also with the equity interest. I thought also that you would have an insurance program, as well as a buy out and you would have potentially loans as well. I thought we gave them the tools they needed. So I thought the bill made sense. I would have liked to have focused on the capital markets and the market to market issue. I do think we should have had coverage above 100,000 for folks who had money deposited in banks, and I do have a reservation about the 700 billion dollars not being enough.

GREGORY: Well, here's what conservatives are arguing, voiced by the idea of the conservative legacy on the opinion page of the "Wall Street Journal" today: quote, "many frustrated conservatives see Mr. Bush's rescue plan, on top of his decision to invade Iraq, as cementing his legacy as a big government conservative. Some law makers accuse the Bush administration of, quote, socialism. Meanwhile, conservative legal scholars question whether the rescue plan is constitutional and predict court battles in the years to come." My question is, there is talk about reconvening in a couple days.

What makes you think there will be a deal then?

SHAYS: I think two things are happening. One is we may submit the same bill, and you may find 15 or 16 members who have changed their minds as they get a different response from their constituents. Even though I supported the bill, my calls were 30 to one against, some they were 500 to one against. So that could be a factor. Also, you could see something like an institution like the SEC dealing with a market to market issue, doing something administratively that we all want them to do, that then changes the dynamic of the legislation.

GREGORY: Congressman, Senator John McCain suspended his campaign to meet, particularly, with House Republicans who didn't like this bill. And it was said by his advisers that he played a leadership role here in bringing people around and, ultimately, coming up with a solution. And then this result today. Did he help or did he hurt?

SHAYS: Well, the bottom line is, last night I would have said it was going to pass. This morning, when I spoke to some of my colleagues, they were pretty determined to have it go down, and they had reasons. And they may, in the end, make it a better bill. So time will tell. In the meantime, we're seeing some real disruption in the marketplace. I would suggest to folks, if they keep selling their stocks, on Thursday, they may want to buy them back.

GREGORY: All right, Congressman Christopher Shays of Connecticut, thanks very much for taking the time tonight. I want to turn back to our panel tonight. Joined now by John Harwood, cNBC chief Washington correspondent, political writer for the "New York Times," Pat Buchanan, Harold Ford back with us as well. Also joined from Los Angeles by Lawrence O'Donnell, MSNBC political analyst as well. John and Lawrence, let me start with you. John, you first. Is there a real prospect that this is going to pass again in a couple of days? What will change then?

HARWOOD: I think there is a prospect it will pass. I think members are going to watch the fallout from a nearly 800-point drop in the stock market and try to figure out who is going to get blamed for that. One of the reasons that this came together on Friday, or began to come together on Friday, was that there was a lot of heat being felt by House Republicans, as well as the McCain campaign, for what had happened so far. That is the failure of the deal so far, and the idea that the stock market might suffer.

So there is some pressure here. I have to tell you one other thing that could turn it around, David. This is very bad news for the John McCain campaign. He has been suffering for the last two weeks since this financial crisis flowered. This just keeps this alive, deepens the anxiety. Nearly 800-point drop in the Dow. This is not what the leadership in the McCain campaign wanted to happen.

GREGORY: Absolutely not. Lawrence O'Donnell, who is in New York tonight, you heard from Senator McCain today. More offense against Senator Obama, saying that he and his Democratic allies injected partisanship into this. So far, and we'll hear from another Republican Congressman in just a moment, what I'm hearing is an ideological opposition to this bill, not the idea of an excess of partisanship.

LAWRENCE O'DONNELL, MSNBC ANALYST: That's what it seems to be, David.

Listen, I've seen close votes like this in the House and the Senate before. This is clearly an instance where the bill was put to the floor without knowing whether they had the exact number of votes to get it across. I've seen bills like that go through, really, and win by one vote. By the way, you will never, ever lose by one vote in the House. When people know that you aren't going to pass the bill, you lose a bunch of votes right toward the end there, who can safely move away from it. So this is actually much closer than the margin that you saw in the vote today. And there is a political tactical compromise available down the road to Speaker Pelosi, which she won't really like. It is basically, let's split what we need here. We need another dozen votes. Let's get another six Democrats, another six Republicans. There is a way to do this again on Thursday. And certainly the market's performance in the meantime will have a lot to do with the momentum for passage on Thursday.

GREGORY: Lawrence, stick around. Let's check in with one of the Republican Congressmen who voted against the bail out bill today. Joining me now is Republican Congressman from Georgia Tom Price. Congressman Price, are you shaken by what happened on Wall Street today? Does it make you rethink your decision?

REP. TOM PRICE ®, GEORGIA: Good to be with you. Challenging times that we have right now and much volatility in the market, no doubt about it. What I'm hopeful for is that we'll be able to get back at the table in a bipartisan way and come up with a solution that embraces American fundamental principles, and makes it so that we can proudly, all of us in the House of Representatives, vote for a bill this week.

GREGORY: What do you need to vote for it?

PRICE: I think we need tax payer protection. We need to make certain that the tax payers are protected.

GREGORY: How? We hear a lot about tax payer protection. Let's talk specifics here, because there was some of that in the bill, according to some.

PRICE: Let me give you some specifics. A mandatory insurance model that will allow for Wall Street to bail itself out not on the backs of the tax payers; significant decrease in capital gains tax, that will infuse capital into the market; accounting reform like market to market reform that you've heard about and net operating loss carry back that make it so that balance sheets for business will appear and be, in fact, much better overnight. Those kinds of things are positive principles that could come to the table and, I think, that kind of bill would have a majority of support on the House of Representatives right this second.

GREGORY: Senator McCain spoke out about this bill. You know it.

Here's what he had to say.

(BEGIN VIDEO CLIP)

MCCAIN: When the financial crisis threatened the economic security of all Americans, I laid out principles to protect hard working Americans. I believed that inaction was not an option.

(END VIDEO CLIP)

GREGORY: Why didn't you follow the standard bearer of the Republican party? He said inaction was not an option.

PRICE: Well, as many have said, it is important to get this right, not necessarily just to do it quick. I believe also that inaction is not an option. But inaction isn't confined to a single day. It is confined to a period of time. And make certain that we do the right thing and not just the quick thing.

GREGORY: Has Senator McCain played a leadership role? Has he helped you and others in this process?

PRICE: I think he has played a leadership role. What he has done is moved the ball forward. When this bill was originally introduced, as some have said, it wouldn't have gotten four or six Republican votes. I think he assisted in making so that it was a much better bill. We have a little bit more to go. And I think we'll get there.

GREGORY: Are you prepared to vote for something you don't like 100 percent?

PRICE: Absolutely. Politics is about the art of compromise. And we're willing to work with every member of the House of Representatives, so long as we're working in an honest and bipartisan way to put together the best bill that we can for the American people.

GREGORY: Do you think a bill ultimately will work, a bail out bill?

Will that solve this problem?

PRICE: I think that the principles that I outlined, that is market reform and infusing capital into the system from a private sector aspect, and accounting reporting reform, will, in fact, be able to solve this challenge that we have right now. I think you would see the markets respond accordingly.

GREGORY: All right. Congressman Price from Georgia, thank you very much for joining us tonight. Coming up next, more on how the economic crisis could impact the RACE FOR THE WHITE HOUSE? And a look at the latest battlegrounds. New maps tonight. We have it when THE RACE returns after this.

(COMMERCIAL BREAK)

GREGORY: Welcome back to RACE FOR THE WHITE HOUSE. Time for us to go inside the war room in this campaign. After going several rounds over the economy crisis in Friday's debate, both of the candidates kept on swinging today. Listen.

(BEGIN VIDEO CLIP)

MCCAIN: Senator Obama took a very different approach to the crisis our country faced. First, he didn't want to get involved. And then he was monitoring the situation. That's not leadership. That's watching from the sidelines.

OBAMA: He has fought against common sense regulation for decades. He's called for less regulation 20 times just this year. He said in a recent interview that he thought deregulation has actually helped grow our economy. Senator McCain, what economy are you talking about?

(END VIDEO CLIP)

GREGORY: Back with us now, John Harwood, Pat Buchanan, Harold Ford Jr., and Lawrence O'Donnell. I want to go around the horn on this quickly, just to get a sense of where everybody is in terms of how this plays for these candidates. What is striking is, on the one hand, you have McCain who wants to treat this as a crisis that he is helping to manage. On the other side, you have Obama, who just wants to talk about how we got in this mess, because if it is the economy, if that's the subject, it benefits his party, presumably. Harold, I'll start with you. How does it play?

FORD: Advantage Obama, probably slightly to moderately, because he is arguing for change. I do think a case can be made about deregulation on Bush and McCain.

GREGORY: Pat?

BUCHANAN: Disastrous for the Republicans in the last two weeks, ever since this broke. McCain had a two-point lead. He is now down eight points. The economy is Obama' issue. Even though Obama is hiding out in the tall grass, that's the place where he ought to be.

GREGORY: John, do you see it that way?

HARWOOD: I disagree with Pat and Harold to some degree. First of all, I don't see Obama as hiding out in the tall grass. Obama and McCain had essentially the same position. They both said we have to act. They both outlined similar principles for what we ought to do, CEO pay, more accountability, more oversight for the tax payer. Their positions were the same. The issue was whether you go on Capitol Hill and sort of inject yourself into negotiations, whether that was a smart thing or not. There's no question-the way I disagree with Harold is it's not a slight to moderate advantage for Obama. It is a big advantage for Obama. And the longer this is a story, the longer that anxiety deepens among the public, it is not good news at all for John McCain. And I'm hearing from Republican consultants that House and Senate candidates are also seeing their numbers go down. It could have a broader affect on the party.

GREGORY: Yet, Lawrence, after Friday night's debate, do you think that Obama made up ground on this issue when he had such a large audience?

O'DONNELL: I think he is gaining ground on it, not so much because of his own efforts. It is just the inevitability of the momentum of this kind of story going in the Democrats' favor and Obama's favor generally. I do think McCain's approach to this rhetorically is smart at this point. Remember, we're only talking about 10 percent of the voters now. This is down to 10 percent of the voters. They are low information voters. They do not follow this closely. A sound bite of McCain as the man of action does have a certain appeal.

FORD: To Lawrence's point, this is Ohio, Pennsylvania, Michigan, Florida, Colorado, Virginia. Lawrence is spot on in his first segment about coming together to work this out. John, I'm with you. You know I hope it is a huge number. I'm only looking at this from the stand point of having run before. People right at the end of this race are watching these candidates, little by little, and watching these sound bites. And Barack has the advantage. But we shouldn't exaggerate this.

(CROSS TALK)

GREGORY: I want to get in here. We're talking about the map. We've got our new NBC News battleground map. Here's a couple of things that are interesting about it, as we put it on the screen. This has likely Obama, lean Obama, likely McCain, lean McCain. A lot of colors there. The total, according to our political unit, is 212-174. That would be in Obama's favor.

Among the toss-ups though, and this is interesting, 152 electoral votes as toss-ups. Look at this, Indiana, Michigan, and North Carolina as toss-up states at this stage of the game. Pat?

BUCHANAN: David, look, John McCain's campaign is in extremes, in my opinion. What he should have done is what he did do. He came back and he got involved. He should have stayed involved. He should have said, the deal as Paulson brought it up, it stunk. We'll change this. I am going to lead it. Out in the country, what are we hearing from the Congressmen? Thirty to one against it, 500 to one against it. That's where middle America is.

This was the turn-around issue, if he had some populist instincts, where he could have improved to it what Congressman Price wants. That would have been a tremendous victory for him. Instead, I think he is too much of the old John McCain of the gang of 14 and McCain/Kennedy.

GREGORY: John, quick thoughts about the map, those three toss-up states at this stage of the game. We're talking about North Carolina, Indiana, in particular, could be very important if it trends that way.

HARWOOD: There is no question about it. We've seen as Barack Obama has drifted up from minus two to plus five, six, seven. Then you start seeing these states that you thought were real reaches for Barack Obama not be reaches, be neck and neck, just like Indiana. That's why the Republicans are-

GREGORY: But Pennsylvania is also a toss-up, which is something that you think wouldn't be as much of a stretch for him. That's a solidly Democratic state. So the-

HARWOOD: It may be a toss-up now, but it is trending in the right direct for Barack Obama, as all these other battlegrounds are.

GREGORY: We're talking about undecided voters, Lawrence O'Donnell, as you said. In a lot of these key battleground states, former President Clinton on "Meet the Press" with Tom Brokaw talked about them, what they're thinking about. Listen.

(BEGIN VIDEO CLIP)

BILL CLINTON, FMR. PRESIDENT OF THE UNITED STATES: Most of these people that are undecided, they like John McCain and they kind of like her, what they know of her. And if they're going to move off of her or dislike her, it is going to be because they think she is too conservative or too traditionally Republican on some issues that are very important to our future.

(END VIDEO CLIP)

GREGORY: Lawrence, he's talking about Sarah Palin. It helps us to foreshadow. We're going to talk more about her in the next segment. Reaction to that?

O'DONNELL: You should run the "Saturday Night Live" version of it.

GREGORY: We're going to get to that.

O'DONNELL: They basically played it as Bill Clinton simply can't bring himself to say something enthusiastic about Barack Obama, but he's very easy about his enthusiasm when it comes to John McCain. It's a strange thing to watch, but it looks like that's the way we're going to see him play at it for the rest of the campaign.

GREGORY: Pat, is that just his own psychology? Can he just not get there?

BUCHANAN: I thought by now he would come around. It is really tough, bringing him across on this one. I just think it's-I think it's innate. The guy is having a very tough time doing it.

HARWOOD: David, maybe he thought he gave at the office with that convention speech.

GREGORY: Exactly. We'll take a quick break here. We'll come back. AS the bail out drama plays out on Wall Street, VP nominees Joe Biden and Sarah Palin are preparing for their debate. It's this Thursday. We're going to have more on that, the Palin factor, and that all important debate when we come back after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

TINA FEY, "SATURDAY NIGHT LIVE": Like every American I'm speaking with, we're ill about this. We're saying hey, why bail out Fannie and Freddie and not me? But ultimately, what the bail out does is help those that are concerned about the health care reform that is needed to help shore up our economy, to help-it has to be all about job creation, too.

(END VIDEO CLIP)

GREGORY: That was Tina Fey playing Governor Sarah Palin on "Saturday Night Live." Let's go back to the panel, John Pat, Harold and Lawrence. Let's listen to the actual Governor Palin talking about Senator Biden today, looking forward to the debate.

(BEGIN VIDEO CLIP)

PALIN: I do look forward to Thursday night and debating Senator Joe Biden. We're going to talk about those new ideas, new energy for America. I'm looking forward to meeting him, too. I've never met him before. But I've been hearing about his Senate speeches since I was in like second grade.

(END VIDEO CLIP)

GREGORY: She is good with the zinger. She is very good with the zinger. She proved that in her speech. Let me just frame this completely now with Fareed Zakaria, who wrote this morning in the "Washington Post" this about Governor Palin: "Can we now admit the obvious? Sarah Palin is utterly unqualified to be vice president. She is a feisty, charismatic politician who has done some good things in Alaska. She has never spent a day thinking about any important national or international issue. This is a hell of a time to start. McCain says that he always puts country first. In this important case, it is simply not true."

We think about her interviews that she's done, with Katie Couric most recently, with ABC before that, and think about this debate coming up. Pat, what are the stakes for her? What is the test for her?

BUCHANAN: Well, some of the interviews, especially the Couric one, have not inspired great confidence. But look, the stakes are enormous. And I think she's been horribly mishandled by McCain's folks. They keep her away from everybody, then throw her out there with Katie Couric. They should have walked her through the Republican conservative talk show circuit, all the way up, got her sea legs, started answering questions at the local level before this. Everybody is apprehensive. I would say to her, if I were there, give her as much information, but don't do what they did to Reagan in the first Mondale debate, stuff him full like a Christmas turkey to where he blew it. And let her be herself in this thing, and go out and just tell her that, be yourself, say what you believe. If you don't know the answer, say so and talk to some issue on it. That's the best way to do it.

GREGORY: I want to hear from everybody quickly here. Harold?

FORD: She's well liked. I think we ought to be careful in dismissing Bill Clinton's recommendations here. Remember, he won twice. It would be nice to win twice again. Three, to beat her, I think you have to focus on issues, vision, and the course you want to take the country. If you make this about qualifications and personality, she does well in that sphere. My advice to my dear friend Joe Biden, who will win this debate, is lay out your course, lay out your vision and tell us why you and Barack Obama will deliver the kind of change that we want. That way we win.

GREGORY: Lawrence?

O'DONNELL: I think Joe Biden should let Sarah Palin talk for as long as she wants. That can only help him. And he can look more gentlemanly in the process. But also, I disagree with Pat. If Sarah Palin says, I don't know to a single question, that will be a wipe out in this debate. She has to got come up with an index card's worth of material on everything.

GREGORY: Final thought here from John Harwood here, the test for her coming up in this debate?

HARWOOD: David, I spoke to one of Joe Biden's Democratic Senate colleagues the other night, said, what does Joe Biden have to do? He made a motion with his hands, way down, nothing at all. He just needs to let her talk. And one potential other advantage for Biden, who has to worry about being disrespectful, is that this economic crisis puts a different filter on the way Americans are going to judge her.

GREGORY: All right. We're going to leave it there. Thanks to a great panel tonight. That does it for RACE FOR THE WHITE HOUSE for this evening. One programming note before we go, be sure to tune to MSNBC for that vice-presidential debate, Governor Sarah Palin, Senator Joe Biden facing off. It's this Thursday, October 2nd, 9:00 p.m. Eastern time. They'll be at Wash-U in St. Louis. I'll be brining you special coverage of the debate all night.Thanks to the panel. Thanks to you for watching. Happy new year to whom it applies. We're back here tomorrow night, same time, 6:00 p.m. Eastern on MSNBC. Stay where you are. "HARDBALL" with Chris Matthews starts right now.

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