updated 10/2/2008 12:51:49 PM ET 2008-10-02T16:51:49

Guests:  Michelle Caruso-Cabrera, Craig Crawford, Mike Larry Persily

RACHEL MADDOW, HOST:  Good evening, K-E-I-T-H.  And thank you.

And thank you all at home for staying with us for this hour.  We are awaiting the Senate vote on the economic-rescue-bailout-insert-your-euphemism-here bill tonight.  You‘re looking at a live picture of the Senate floor.  And we will bring it to you live.

We are also getting ready, like everybody else, for Sarah Palin versus Joe Biden tomorrow night.  We‘re watching Barack Obama‘s standing in the battleground state polls.  There‘s lots of going on.  We‘ve got a very big hour ahead.

(voice over):  Will the Senate do on Wednesday what the House wouldn‘t do on Monday?  Two days the (INAUDIBLE) vote to more FDIC insurance and a few tax breaks later, the upper chamber votes on the revised rescue plan.  Tax breaks?  Tax breaks.

The Senate votes tonight.  We have all the action and reaction from Capitol Hill.

Will Sarah Palin do what nobody thinks she can do?

(BEGIN VIDEO CLIP)

KATIE COURIC, CBS NEWS ANCHOR:  What other Supreme Court decisions do you disagree with?

GOV. SARAH PALIN, ® VICE PRESIDENTIAL CANDIDATE:  Well, let‘s see. 

There‘s.

(END VIDEO CLIP)

MADDOW:  No, Sarah Palin will not dazzle (ph) Katie Couric.  But do not kid yourself, Sarah Palin can debate.  We‘ve got the evidence and the reporting to start raising your expectations for Thursday night.  And seriously, if it turns into a flute playing contest, Biden is in trouble.

(VIDEO CLIP OF GOV. SARAH PALIN PLAYING FLUTE)

In an angry interview in Iowa, did John McCain just invite scrutiny of his truth-telling record lately?

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, (R-AZ) PRESIDENTIAL CANDIDATE:  I have always had 100 percent absolute truth.

(END VIDEO CLIP)

MADDOW:  It does sound like an invitation.  Mind if I take a crack at that?

(BEGIN VIDEO CLIP)

MCCAIN:  I take strong exception.

(END VIDEO CLIP)

MADDOW:  And Bill Clinton maybe on to something.

(BEGIN VIDEO CLIP)

BILL CLINTON, FORMER U.S. PRESIDENT:  This is not close, folks.  It is not a close question.

(END VIDEO CLIP)

MADDOW:  Obama v. McCain may or may not be a close question, it is a close race.  But if the polls mean anything day by day, that race is getting less close now.

The good news for Barack Obama with “Congressional Quarterly‘s” Craig Crawford.

Oh, and some more amazing flute playing.

(VIDEO CLIP OF GOV. SARAH PALIN PLAYING FLUTE)

MADDOW:  THE RACHEL MADDOW SHOW starts now.

(on camera):  It turns out that everything we thought we knew about Sarah Palin is wrong.  All the fundamental cornerstones of political common wisdom about Sarah Palin has crumbled to dust.  The things we‘ve all assumed about Governor Palin‘s political importance and function have made true that old scolding about assuming making an—ass out of Uma Thurman or whatever that thing was.

For instance, Sarah Palin helps McCain among women, right?  She‘s a woman after all.  Well, the truth is, she‘s not helping among women at all, according to a new “Time” magazine poll.  It shows Obama leading McCain by 17 points among women nationwide.  Before the Palin pick?  Obama led by 10 points.  So, the numbers suggest at a very least that Sarah Palin‘s nomination has coincided with John McCain becoming seven points less popular among women, not more popular.

What about the idea that Palin is solidifying support for McCain with the conservative base?  That seemed true for a while, but now, she‘s getting publicly slammed and ridiculed by the likes of former Bush speechwriter, David Frum, former McCain aide, Mike Murphy, conservative all stars like George Will, David Brooks, Charles Krauthammer, Stephen Hayward, Kathleen Parker, all of whom have, at least, questioned the pick.  Some of whom have gone so far as to call for her getting booted off the ticket.

If that is solidifying the conservative base, then I‘m the queen of England.

Another thing we all used to be so certain about?  Sarah Palin will be a laughing stock at tomorrow night‘s debate with Joe Biden, right?  After all, look how she did with Katie Couric, again, tonight.

(BEGIN VIDEO CLIP, “CBS EVENING NEWS WITH KATIE COURIC”)

COURIC:  What other Supreme Court decisions do you disagree with?

PALIN:  Well, let‘s see.  There‘s—of course, in the great history of America, there have been rulings that there‘s never going to be absolute consensus by Americans.  And there are—those issues, again, like Roe v.  Wade where I believe our best held on a state level and addressed there. 

So, you know, going through the history of America, there would be others,

but some -

COURIC:  Can you think of any?

PALIN:  I would think of any—again, that could best be dealt with on a more local level.  Maybe I would take issue with.  But, you know, as a mayor, and then as a governor, and even as a vice president, if I‘m so privileged to serve, who would be in a position of changing those things, but in supporting the law of the land as it reads today.

(END VIDEO CLIP)

MADDOW:  Performances like that have created another cornerstone of political common wisdom about Sarah Palin—she will flub her debate.  Except, the more we learn about her as a debater, the more it seems clear that she probably won‘t.

Sarah Palin is not only an experienced debater from her time in Alaska politics, but one of her former opponents says, quote, “She has a Reagan-like ability to win over audiences.”  A former editor with the “Alaska Daily News” says Palin has slammed (ph) one debate opponent “like Muhammad Ali dancing around the ring.”

If Palin is Muhammad Ali, she is working the heavy bag with Angelo Dandy (ph) down in Sedona right now, drilling on better answers to questions about the Supreme Court and Russia and which newspaper she reads.

And as past as any prologue, Sarah Palin will find at least one opportunity to turn a Gwen Ifill question into a folksy crowd pleasing story like she did when she was running for governor of Alaska.

(BEGIN VIDEO CLIP, ALASKA PUBLIC TELEVISION)

PALIN:  I have a college degree in journalism.  Semantics words are very important to me.  So, you would think that I would never be putting my foot in my mouth, and yet, even as recent as about a week ago, when I was in Wasilla, I was so excited about being in my own hometown, speaking to our chamber of commerce there, that instead of using the word, “Well, I always love my town,” I said, I think, I used the word bias.  And I shouldn‘t have used the word “bias.”  So, yes, mistakes with semantics caused some, resulted in me putting my foot in my mouth, once in awhile.

(END VIDEO CLIP)

MADDOW:  And if past debate performance is anything to go by, expect Sarah Palin to score points with a seemingly good-natured but really a put-down joke aimed at Joe Biden.

(BEGIN VIDEO CLIP, ALASKA PUBLIC TELEVISION)

LARRY PERSILY, PANELIST:  Ms. Palin, if your elected governor, would you hire your opponents for a state job, and if so, for what job?

PALIN:  Andrew Halcro would be the most awesome statistician that the state could ever even look for.  He would be so—yes, Andrew would be the statistician.

PERSILY:  Ms. Palin, would you hire Mr. Knowles for a job?

PALIN:  Do they need a chef down there in Juneau?  I know that that is what he enjoys doing.  I saw the profile on him the other night and I know he‘s really good at that.

(END VIDEO CLIP)

MADDOW:  I would hire you to cook for me.  Wow.

Let‘s turn now to Larry Persily.  He‘s a former Palin staffer.  He worked at the Alaska state office in Washington, D.C. until earlier this year.  Before working for the governor, he was the opinion page editor with the “Anchorage Daily News.”  He served as a panelist during one of Governor Palin‘s 2006 gubernatorial debates.  We just saw him there.

Mr. Persily, thanks very much for joining us.

PERSILY:  Happy to be here.

MADDOW:  Politically, the goal is always to lower expectations before a debate.  Everybody does it at every level of government.  Having seen Governor Palin debate up-close, what are your expectations of her performance against Joe Biden?

PERSILY:  I think Governor Palin is going to go back to her strength.  She is not going to try to get engaged in a policy discussion, less in history with Senator Biden, she will go back to the gushing, effervescent, cheerful, positive personality every chance she gets during the debate.

MADDOW:  What sorts of debate questions would be the sort of things that Governor Palin might avoid, that she might think would give her trouble?  Specifics on policy or as you suggest, on history or international trivia, or would there be questions of surprise that she would try to avoid?  Have you seen any pattern?

PERSILY:  I think any and all of the above.  You know, Governor Palin has her stump speeches.  She has her emotional buttons that she can press with the American public.  For example, during that November 2006 gubernatorial debate, she was asked a question about healthcare in rural Alaska, a big issue in the villages.  She answered it with a speech about resource development.  We must develop more of our oil and gas mining, and our resources so we have lots of money to buy everything we need to solve all our problems.

So, if she gets hit with a question that she doesn‘t have a specific answer to which happened a lot in 2006, she avoided the specifics as much as possible, she‘s going to steer it to something she‘s comfortable with and make one of those emotional speeches, trying to appeal to the hearts of Americans.

MADDOW:  And you know, in that last clip that we just played, you almost saw sort of a mid-level (ph) of awareness of that as her own strategy.  She made fun of one of her opponents, calling him, the person that she would like to appoint to be the Alaska‘s state statistician, essentially mocking him for having a lot of facts and numbers and specifics and the types of answers that she gave.

Does she pursue that sort of strategy with the real political commitment to, I guess, anti-intellectuals in politics, is that something that she would argue for overtly?

PERSILY:  Well, I think, she knows that making fun of the elite, the eastern elite media, the forces that are perceived to be against Alaska, making fun of people goes over well with the public.  And, I think, in that clip we just saw, you know, it was a subtle putdown, but it was a putdown.  And she‘s very good at standing up for herself.

Someone asked me if she‘s a fierce debater, I don‘t think she‘s fierce, but she‘s smart and she knows her weaknesses and she plays her strengths and avoids the weaknesses.

MADDOW:  And I think that, at least it seems that that comes from just a real self-confidence.  And given that, I wonder if, I think one of the things people have worried is because she is a woman, because she is going to be going up against a man who is very familiar to the American people, who has decades of experience in the Senate, who is many years her senior, I think people have thought, based on those facts on paper, that Joe Biden runs the risk of looking like a bully.

I don‘t get the sense that a person can look like they are being bullied if they exude self-confidence.  So, I wonder if you think that that concern that people have about Biden looking like a bully might be misplaced.

PERSILY:  I think it‘s misplaced.  I think Senator Biden and the Obama camp know that trying to beat up on Sarah Palin is not a good strategy for tomorrow.  I think Biden will play his own game, try to show how smart he is, and hope that Palin digs her own problems or as she talked about on those clips, puts her own foot in her own mouth.  I don‘t think he‘s going to come out against her.

MADDOW:  On the issue of how Alaskans feel about Sarah Palin, that‘s one of the things that I‘ve been trying to pay attention to over the course of this campaign, to see how much we can learn about her past experiences governing and her past experience with popularity.  She has been a very popular governor in Alaska, but since she has been running as a vice presidential nominee, it seems like her popularity is slipping a little bit in Alaska.  Is that because she is behaving differently as a vice presidential nominee than what Alaskans are used to from her?

PERSILY:  Two things, a lot of her weaknesses are being exposed now.  And they were never exposed during the 2006 gubernatorial campaign and they never came out in her first two years as governor.  So, people are seeing her weaknesses, the problems.  They are seeing a mean side, a vindictive side of Governor Palin.  The national media is really examining everything she‘s done.

So, this has really hurt her standing in Alaska.  If she loses this race and comes back to Alaska, it‘s going to be a much different Palin administration.

MADDOW:  If you had to put money on it, who do you think—who do you think the winner of tomorrow night‘s debate is going to be, in terms of the if there is going to be a consensus opinion on it?

PERSILY:  I think Palin wins if she loses no more ground.  She has to remind her base why they love her so much.  I don‘t—I think, if she can hold on to her own with her base, that would be a victory for her because she has been on a downward slide the last couple of weeks.

MADDOW:  Larry Persily, former opinion page editor with the “Anchorage Daily News,” former Sarah Palin staffer, thank you so much for joining us.

PERSILY:  Thank you.

MADDOW:  New poll numbers out today put an exclamation point on the big giggly-eyed, sideways, (INAUDIBLE) emoticon (ph) on the perception that the economic crisis has turned American voters against John McCain and toward Barack Obama.

Coming up: We will break down the surging poll numbers for Obama—and we‘re not just talking about the national ones, we‘re talking about the battleground states where elections are actually won and lost.

Plus, from Washington, we will hear the very latest on the latest financial bailout bill which the Senate is just about to vote on.  Keep it right here.

(COMMERCIAL BREAK)

MADDOW:  Now, something you thought you knew about Sarah Palin.  You were sure she was the runner up for Miss Alaska because of her political acumen, her poise, maybe her aim with a hunting rifle.  Wrong again.  The woman can carry a tune.

Have we ever had a flutist vice president before, America?  Please tell me no.  We, here at THE RACHEL MADDOW SHOW are drunk on our video editing skills after sitting in this office watching this over and over and over again today.  We could not restrain ourselves from adding lyrics to the newly-discovered video of the former Miss Sarah Heath‘s performance in the Miss Alaska pageant talents competition.  Feel free to sing along at home with our lyrics.  Or, add your own.

(BEGIN VIDEO CLIP)

PALIN (voice-over):  You can actually see Russia from land here.  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.  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)

(COMMERICAL BREAK)

MADDOW:  Breaking now, live in Washington, we are expecting a vote, any moment now from the United States Senate, which is considering the financial rescue plan.  As you know, a couple of days ago, the United States House of Representatives considered this bill.  It was expected to be either be close or to pass.  It did not pass.  House Republicans voted two to one against it.

At that point, the bill, which has started off at about 2 ½ pages had become 110 pages.  Now, what they are voting on tonight in the Senate is in excess of 450 pages.  It not only includes the basic idea for the treasury to rescue Wall Street, to buy troubled assets from financial institutions, it also includes about $150 billion of new stuff that wasn‘t in what the House voted on.

Joining us now from Washington is MSNBC congressional correspondent, Mike Viqueira.  He‘s on Capitol Hill tonight, monitoring the vote.

Mike, thank you very much for joining us.

MIKE VIQUEIRA, MSNBC CONGRESSIONAL CORRESPONDENT:  Certainly (ph), Rachel.

MADDOW:  How much pressure is on Democratic and Republican leadership to get this—to get this passed?  Do they see this as a do or die night in the Senate?

VIQUEIRA:  Not in the Senate.  The Senate is relatively a foregone conclusion, Rachel.  But I‘ll tell you where the pressure is going to be after this vote tonight, and we are about to vote very quickly, now, to a final passage vote on this economic bailout proposal.  The pressure, because it appears as though it‘s going to be an overwhelming vote, Republicans joining Democrats, very few voting on a preliminary motion against this economic stabilization act, the pressure is going to be on House Republicans and House Democrats.

Of course, it was on Monday when it fell apart, in that big debacle on Monday afternoon when the vote failed.  And if you were a proponent of that bill, you had to be disheartened to see the stock market drop 777 points in the moments after the bill failed.

Now, the pressure all on the Senate, this was a breathtaking political play on behalf on the part of Harry Reid, collaborating with the Republican Mitch McConnell, to sweeten up this bill with $106 billion worth of tax breaks and other items to make it much more palatable to House Republicans, but doing so at the possible expense of House Democrats, because there are many in the fiscally-conservative over there called “blue dogs,” who are mad because a lot of these tax breaks that had been added on are not paid for, they are actually more deficit spending.

So, a lot of pressure here.

The alchemy, the balance of the House votes is very delicate.  We‘re hearing optimistic signs all day today from the House.  But intense arm-twisting going on, again, for the second time in the week, behind the scenes on the House as Republican leaders have been on the phone all day, testing the waters, reaching out to their members, finding out where they are, trying to come up with some of the 12 votes that they needed to switch from Monday‘s vote to have this vote carried today on Friday, Rachel, when they expect to bring it back to the House floor.

MADDOW:  Mike, when you described this as an expected, essentially a foregone conclusion, you‘re expecting an overwhelming vote in the Senate for this measure, do you get the sense that that overwhelming vote is expected because of the sweeteners that were added to this measure or would this have passed overwhelming in the Senate even without that stuff and that stuff is targeted purely toward the House vote?

VIQUEIRA:  That is an excellent question.  And it would have passed overwhelming even as it was presented in the House on Monday.  Lamar Alexander, he‘s the number two Republican from Tennessee in the Senate had indicated before that Monday vote that he‘d expected to get 40 Republicans on that initial bill.  But what happened was is that Harry Reid and Mitch McConnell decided that to take matters into their own hands, essentially.

And with very limited consultation with their Democratic counterpart on the other side (ph), we call this a political jam in Capitol Hill (INAUDIBLE).  They are going to jam Nancy Pelosi, Steny Hoyer, and the rest of House Democrats and see if they can—and force them to go along.

Now, the preliminary indications are that it might be a successful strategy.  But it‘s a dangerous strategy because the House, at this point now, could take up that bill and somehow decide to change it.  That‘s very unlikely—very unlikely, but a lot of open questions here.

Again, though, we are headed towards a Friday showdown in the House.  One thing is certain, that House Democratic leaders who are in charge of the scheduling floor action in the House of Representatives, will not put a bill on the floor, again, as they did on Monday and roll the dice, not knowing whether or not they have the votes.  If that bill goes on the floor Friday in the House of Representatives, you can be sure that those House leaders are sure that they have the vote to make it pass.  They do not want to see another debacle like they saw last Monday.

MADDOW:  When Harry Reid decided to add these additional items to this bill today, he put it forth before the Senate, and this, as you say Mike, that was really for the benefit of the House, that would not have made a difference in terms of how the Senate voted—do you know that those sweeteners were chosen specifically to appeal to House Republicans who voted against it?  Was there consultation with the progressive Democrats who voted against it?  Was there consultation with the “blue dog” Democrats who don‘t tend to like additional spending or tax cuts that aren‘t (ph) offset in the budget?

VIQUEIRA:  Well, not a lot of consultation.  Some heads up to get on the Republican side and that‘s what has Democrats on the House side so angry at this point.  They‘ve added this, the expansion of the FDIC program, of course, the generations-old program that ensures everyone‘s bank account.  It stood for many years at $100,000.  And they want to expand it to $250,000.

And these spenders tax bill again in Capitol Hill speech (ph), these are tax breaks that they have to renew year after year after year simply because the political will isn‘t there to put them in a permanent tax law.

MADDOW:  Mike, I‘m going to cut in on you just for a second here.  They are starting the roll call.  We want to get a little bit of live coverage of that if we can for just a moment.  We‘ll come right back to you.

VIQUEIRA:  Sure.  OK.

MADDOW:  That‘s the dramatic sound of static.  They are calling the roll for this vote in the United States Senate.  As always, my timing just impeccable on these matters.

Mike, from your position on Capitol Hill, can you tell us exactly what‘s happening right now?  What‘s the next things that we are going to see unfold here?

VIQUEIRA:  Well, you‘re right.  You‘re seeing that they are (ph) calling the roll.  And they are voting on this sweetened up economic stabilization package, Rachel.  And incidentally, we don‘t call it a bailout act anymore over here.  Everybody got together for some semantic revisionism because bailout has such a negative connotations, bailing out the abuse and greed of Wall Street, and a lot of people blamed Henry Paulson for the rollout here and the way it was handled from a public relations standpoint.

And so now, we‘re calling it the economic recovery act.

MADDOW:  Well, choose your euphemism at this point.  We‘re going to cut back just one second again, Mike, for additional roll call to pass this prologue, as soon as I toss to it.  The clerk will stop calling names.  Let‘s see if that works tonight (ph).

VIQUEIRA:  Which is unusual because they‘re all gathered in the floor (ph) there.

MADDOW:  They are all gathered right there.  This is a live image from the floor of the United States Senate.  Even both presidential candidates and vice presidential nominee, Joe Biden, back on Capitol Hill in order to cast this vote.  As Mr. Viqueira said, this is not thought of as being a particularly dramatic vote in terms of the outcome.  It is expected to pass.

What the Senate is setting up the United States House for, though, is a matter of very high drama, the drama not just between the parties here, just sort of (ph) not even between the two parties, but really within the parties—as leadership in both houses and the standard bearers of both parties try to find a path through this minefield between the different sanctions of their own parties, and their own interests and electoral concerns about voting for or against this piece of legislation.

Joining us here in New York City is Michelle Caruso-Cabrera from CNBC.

Michelle, thank you for being with us here.

MICHELLE CARUSO-CABRERA, CNBC:  Good to see you, Rachel.  It‘s a pleasure.

MADDOW:  Looking ahead to the expected impact of this bill, obviously, this is not the end, this is the beginning.  Whatever the Senate passes here is going to go to the U.S. House.  What do you expect tomorrow in terms of a market reaction to tonight‘s vote in the Senate if it does, as Mike suggested, pass overwhelmingly?

CARUSO-CABRERA:  I think it‘s going to be pretty muted because, as Mike was saying, the Senate was pretty much assumed.  And again, the key issue, the House has become the show me state, so to speak.  The White House really wants to see them actually do what they said they were going to do because, remember, we heard from them all weekend last weekend that, indeed, something was going to get done.  And we were all shocked as it happened live in the middle of the trading session when, in fact, it didn‘t get done.

So, even if we hear from House Republicans that they‘ve got something, now, we worry that they‘ve added so much stuff that it upsets the Democrats and maybe, they aren‘t going to come along.  So, we‘re going to wait and see for that final hammer to come down, so to speak.  And then, I think, that‘s when you‘ll see a true Wall Street reaction.

MADDOW:  Does Wall Street care about what else is in the bill besides the bailout itself?

CARUSO-CABRERA:  Not at all.  I mean, for Wall Street, another $150 billion doesn‘t really matter to them.  What they really care about is restoring confidence to the market.  Everybody gets focused on the numbers, but they really want to see is, some of these mortgages sucked out of the pipes of the financial system so that credit can start to flow again.

If you look at the auto sales numbers that were just—dismal, horrendous.  I mean, you can‘t describe how bad they were and that‘s because Americans can‘t get loans.

If you have high quality credit a year ago, 90 percent of those folks were getting loans, now, it‘s reduced to 60 percent.  If you have low quality credit a year ago, 60 percent of those kinds of customers were getting a loan, now it‘s only 10 percent.  When people can‘t get loans, they can‘t buy cars, the auto dealers go out of business.  They lay people off.  That has effects on communities in terms of paying off their mortgages, eating at restaurants, et cetera.

So, that‘s really what they are focused on.  Everybody is upset about the sweeteners.  I‘m upset about the sweeteners.  I hate the way they make the sausage.  But the fact is, they want the overall bill done.

MADDOW:  One of the things that has been put forward politically by House Republicans who voted against this a couple of days ago is this idea that an accounting rule change—that those of us who don‘t follow the stuff everyday can‘t quite get our heads around.  But an accounting rule change that would essentially allow banks to revalue their assets by means other than just by saying what they are worth in some assessment of their fair market value.

To me as a layman, as somebody who is just a generalist and interested in these things, that seems like a magic wand-type solution that doesn‘t make a real enough change in the economy to fix this thing.

CARUSO-CABRERA:  Yes, I would agree with you on that respect.  When you change the name of something, a rose by any other name is still the same thing, right?  I mean, it doesn‘t necessarily make you more confident about the quality of the assets that are on the balance sheet.  It doesn‘t make bad mortgages good, right?  It doesn‘t make people pay off their bills.

What people don‘t like are the cascade effects that happen.  There‘s all these legal regulations that when you start writing things down on your balance sheet, then your capital ratio, I know this all sounds very complicated, but it sets up this whole cascade that a lot of people think is one of the reasons why the seeing banks fail.  And you don‘t want this to really aggravate a situation.

I agree with you, I think it‘s poppy talk (ph).  I think it should just stay the same way that it is.  But maybe you want to get rid of capital ratios and other things that happened as a result.

MADDOW:  I think that, politically, as we see these issues translated to the electorate and out of the hands of just the regulators, and just the economists, and just the fed and all these people who deal with this stuff all the time, I think, some of the friction with the American people about this is the sense that there is a real distance between the financial engineering that has happened, between the balance sheet adjustments that are being negotiated for the benefit of these financial institutions, and the real economy from which these problems ultimately derived.

And while these sweeteners are frustrating, I think, one of the things, particularly from the left, one of the criticisms here, one of the suggestions from the left is that if this bailout is going to happen, and stuff is going to be added to it to make people vote for it, rather than just trying to bring along the House Republicans, put some stuff in this that is going to address some of the real economy issues.  Not financial engineering issues but things like unemployment and homeowners assistance.  That would make a difference in regular American families‘ lives, not just on the balance sheets of the big institutions.

CARUSO-CABRERA:  Well, the balance sheet thing that you are talking about, the whole mark-to-market, that‘s a very teeny, teeny part of this.  The overall idea of the bill is to do exactly what you are saying.  You have all those rules and regulations about how many loans that a bank can write.

And, right now, they‘ve got a bunch of loans—mortgage loans—some are good and some are bad.  It‘s just that there‘s a huge volume of them that they can‘t move off their books.  In the old days, they could sell them, but nobody wants to buy them right now, so they are stuck sitting there.  They‘ve got a box that they can‘t rid of.  That box is full and until you take stuff out of it, you can‘t put other loans into it. 

So no other business gets done until you get rid of them.  So the idea of the overall bill is indeed to help Main Street, because, like I said, when you can‘t get a car loan, there‘s a whole ripple effect.  When you can‘t get a home loan, there‘s a whole ripple effect.  When you go to the electronic store and you‘d like to buy the big screen TV on payments, maybe - I don‘t think it‘s a good idea.  Maybe you shouldn‘t go into debt.  But people - that‘s what they do and that supports jobs all the way (INAUDIBLE) the economic change. 

MADDOW:  Michelle Caruso-Cabrera from CNBC, joining us in New York as we continue to monitor events on the Senate floor.  You can hear the clerk there calling - the roll call on the floor of the Senate.  We will, in fact, see Barack Obama, Joe Biden, John McCain in the Senate today.  Sen.  Obama, for one, gave a 13-minute speech on behalf of the rescue bailout - euphemism - plan today.  All three candidates are back on Capitol Hill. 

Joining us now from Washington is MSNBC political analyst, Craig Crawford who is also a columnist at “CQ.com.”  Craig, thanks very much for joining us tonight. 

CRAIG CRAWFORD, MSNBC POLITICAL ANALYST:  Always fun waiting from the Senate. 

MADDOW:  I know.  And also trying to figure out what exactly we are waiting for.  I sort of wish they did it all on a jumbo-tron, you know, so you could see their votes as they pile in. 

Now, we heard from Mike Viqueira, congressional correspondent, just moments ago that this is essentially a foregone conclusion to the extent that we think that the Senate is going to vote for this.  They are teeing up something to go back to the House sometime in the next couple of days.  What is the biggest political question that is going to get answered tonight, Craig?

CRAWFORD:  Well, I think the Senate is trying to put some pressure on the House and put that political pressure on some of those House Republicans in particular by giving them those sweeteners. 

And you know, this is what happens whenever the bill takes too long.  The recent administration wants to do it so quickly earlier because the longer something like this takes, the more pork or earmarks or other things you have to put in these things to get the votes.  So what we are going to learn probably over the next 24 hours is just how much of that that was in this. 

MADDOW:  Craig, we‘re going to go right now back to Mike Viqueira, who was in Washington.  He‘s actually on the phone for us.  He‘s monitoring these events live at the Capitol. 

Mike, I understand they are getting close to a final tally here?

MIKE VIQUEIRA, MSNBC CONGRESSIONAL CORRESPONDENT (on the phone):  Well, that‘s right - 47 seconds by the clock.  And you see the Senate floor emptying out and senators are gathered for a series five votes this evening.  Between the last one, I‘m told that the motorcades of the presidential candidates have screened away from the Capitol now. 

It was seen (INAUDIBLE) the two presidential candidates.  And vice presidential candidate, Joe Biden, of course, was here fulfilling their roles in their day jobs as United States senators that I expected to vote aye.  I haven‘t been able to hear exactly how they voted, but let‘s assume that they did.  So things thinning out here in the Senate as we bring this vote to a conclusion.  And again, I expect it to be an overwhelming vote in favor of this economic stabilization package or let‘s call it a bailout. 

MADDOW:  We will we be hearing from the senators unless it is unanimous.  If we do hear some no votes tonight, will those senators be called upon to, I guess, help bridge the gap between the yeses and no‘s in this (INAUDIBLE)?

CRAWFORD:  That is another good question.  You know, one interesting thing that you saw Sen. Obama speaking in the across the (INAUDIBLE) today.  And I got a tip from a Democratic operative in the House.  And this individual says, “Turn up your television and listen to what Sen. Obama says.  He‘s going to help us out with those blue-dog, fiscally conservative Democrats. 

And sure enough, as soon as I turned the television up, Sen. Obama says, in his administration there‘s a pay-as-you-go rule.  In other words, there will be no more deficit spending. 

So even there, a level of coordination that was surprising for House Democrats to pull that now in the middle of this.  It just goes to show you what kind of stakes we‘re talking about, what is at stake here both as a political matter and obviously as a fiscal and economic matter in the vitality of the nation.

MADDOW:  Mike, let me ask why it is that there a 60-vote threshold for this vote tonight.  I grew up thinking that if you got 100 votes, 51 counts as a majority.

VIQUEIRA:  Those are rules that have been around in the Senate for a few generations now, that whenever there‘s something contentious, which virtually everything is, there‘s a 60-vote threshold, Rachel.  That‘s just the way it is. 

And that is one of the frustrations that anybody running the Senate until the last two years of course, that has been Democrat, and in particular, in their efforts early in this session last year to try to stop funding for the war, do something about changing the policy for the war.  They were never quite able to meet the threshold.  It is what it is, Rachel, and it is 60 votes. 

MADDOW:  We are getting notification now from the Associated Press that the 60-vote majority needed to pass the bailout bill has been reached.  As you can see there, the voting does continue in terms of getting a final tally.  Obviously, they want to get as close to unanimous as they can on this in order to create momentum and honestly, political cover for the House, from members of the House who are going to be facing this next. 

But we do know that it has passed.  We‘ve now got the tally - 74 to 25, a three-to-one margin, nowhere near unanimous.  Those 25 no-votes are, of course, going to be the subject of some serious scrutiny as congressional leaders try to put together a strategy to figure out how they can avoid this bill dying again in the House the way it did two days ago.  It is now a substantially different bill than it was before. 

We‘re going to go back to Craig Crawford now who is in Washington.  He is an MSNBC analyst.  He‘s at “CQ.com.”

Craig, looking at that margin, 74-25, is that a worrying margin for people trying to think about political dynamics heading into that bill in the House?

CRAWFORD:  I think no matter what happens, where there‘s no one - either chamber of congress, there‘s going to be those in tough races who are going to vote against it because their leadership lets them.  You know, the whole negotiation that‘s been going on here is the leaders of both major parties in both the House and Senate are trying to get enough votes to pass it and still allow those members in their parties in tough competitive races to vote against it because this is so unpopular with most of the public. 

MADDOW:  So the goal - if you‘re a political strategist in one of the parties here, the goal is to get it passed, because the leadership on both sides has all said that they want it passed and the presidential candidates say they want it passed.  They are all trying to pass something, but they‘re trying to pass something without too many votes. 

(CROSS TALK)

CRAWFORD:  Yes.  I don‘t think you‘ll ever see any unanimous votes on this particular issue ...

MADDOW:  Yes.

CRAWFORD:  ... because there are so many members who need to vote against it because they‘re in tough races in their home states and districts.

MADDOW:  I hear you.  Going again now to Michelle Caruso-Cabrera with CNBC who has generously offered to come and spend some time explaining this with us tonight.  Michelle, thanks for joining us again. 

CABRERA:  It‘s a pleasure. 

MADDOW:  Looking at this bill now, with this vote - three-to-one vote in favor of this in the Senate, one of the big changes that has happened since the last vote on this is that FDIC insurance limit has changed from $100,000 to $250,000.

CABRERA:  Yes.

MADDOW:  Is a change like that something that has a big fiscal effect in terms of what the government actually outlays toward this big fix?

CABRERA:  Only if you have numerous banks that fail and you don‘t have enough deposits in there.  But frankly, I‘m surprised it hasn‘t been done before.  We‘ve had the $100,000 limit for a long time, and if you just did a, you know, cost of living adjustment or adjust it for inflation, you‘d automatically get to that level.  So that makes a lot of sense. 

And remember, what you want to do is you want to prevent runs on banks or what they call the walk on the bank.  What they found was that people were insured up to $100,000.  So anything that they had above that they were moving to other institutions.  So they call it a “walk on the bank.”  And that leads to weakness in the banks.  It‘s one of the reasons we saw a couple of bank failures last week.  So if they can stop that, that keeps confidence within the system.  That‘s a pretty good thing to do.

MADDOW:  Michelle, one last question here.  Politically, I had suggested that if they got a unanimous vote here or something very close to a unanimous vote, it would offer a lot of political momentum and cover for this expected House (INAUDIBLE) tomorrow and Friday.  They did not.  It was a three-to-one vote still.  But still, 25 no-votes on this thing.  Economically, what happens if the House doesn‘t pass the bill by Friday?

CABRERA:  You know, it depends on who you talk to.  Some of the real doomsayers out there say we could end up in a depression because it‘s going to kill any confidence that‘s left in the financial system.  And it means we‘re not going to get a lot of action to once again settle these mortgages out the pipes of the financial system.  That‘s the extremists. 

We have - you know, you have some libertarians out there who say that‘s a lot of (INAUDIBLE) caucus.  Well, that‘s fear-mongering.  They are doing that to kind of shove this down people‘s throats.  But I will tell you, the overwhelming majority of economists say it will be extremely detrimental to the economy, a sharp rise in unemployment which could start as early as this week because the small companies are not going to be able to meet payroll and things like that. 

MADDOW:  Michelle, we‘re cutting that to Harry Reid.  He‘s speaking live on Capitol Hill. 

CABRERA:  Sure. 

(JOINED IN PROGRESS)

SEN. HARRY REID (D-NV), U.S. SENATE MAJORITY LEADER:  This is not a piece of legislation for lower Manhattan.  It‘s legislation for all America.  And by the way, it cuts taxes for middle class America in many different ways.  It creates jobs here at home. 

Now, the American people have a right to be frustrated with the economic crisis that they face, and we share that with them.  But in action is not an option, which is why we worked the American people have a right to be frustrated with the economic crisis they face.  We share that with them.  But inaction is not an option, which is why we worked expeditiously and in bipartisan manner to stop a bad situation from getting even worse. 

It‘s my expectation the House of Representatives will follow suit.  We all understand the process hasn‘t been easy, but passage of a responsible answer to crisis is now in sight. 

I want to take this time to express my appreciation to my counterpart, Sen. McConnell.  We worked together for the good of the country.  I am so impressed.  Having been in Washington 26 years, it‘s hard for some to comprehend, I guess, there are people who are more impressive each time you work with them, and that‘s Chris Dodd.  And each day that we worked on this crisis together, I, being his lieutenant - he was out front on this, has been every day a day of my being more impressed. 

I‘ve stated on the Senate floor on many occasions how much I appreciate Judd Gregg.  We disagree on lots of things, but the one thing we don‘t disagree on is his being a great representative for the state of New Hampshire.  I appreciate very much having been able to work with him. 

The input of the Finance Committee, Sen. Baucus, has been something I will always recognize and remember.  And of course, the work of Sen.  Conrad, who is our money man on the Democratic side, has been exemplary. 

Sen. McConnell. 

SEN. MITCH MCCONNELL (R-KY), U.S. SENATE MINORITY LEADER:  Well, thank you, Harry.  This has been the Senate at its finest.  In the years I have been here, I can‘t recall a single time where, in this close proximity to an election, both sides have risen above the temptation to engage in partisan game playing, if you will, to address an issue of magnitude - great magnitude.  The fact that Sen. Obama and Sen. McCain were here tonight also played a constructive role in the process is also quite significant. 

One of the things that I run into all the time in my state and across the country is people saying, “Why can‘t you, folks, ever get along and do anything together for the country.”  Well, I wish we could do that more often, but we clearly have demonstrated in the toughest possible situation, five weeks from the election, that we can come together and address a major crisis. 

As my friend, the majority leader has indicated, this was a measure for Main Street, not for Wall Street.  This is a measure that was much need to unfreeze the credit markets and get America‘s economy working again. 

I also want to express my gratitude to my old friend Chris Dodd for his work on it and particularly, Sen. Judd Gregg who I designated as our negotiator who did a brilliant job of representing the interest of my conference.  And frankly, I don‘t think we would be here tonight without the magnificent work of Sen. Gregg. 

So this is an important occasion for our country.  We have much to be proud of.  This doesn‘t entirely solve the problem, but it begins to moves us in the direction of getting the American economy back where it needs to be very soon. 

SEN. CHRIS DODD(D-CT), BANKING COMMITTEE CHAIR:  Well, let me - a couple things.  First of all, let me thank our leadership because I think the tone that brought us to this vote this afternoon gets set by the leadership.  And if that tone is working in the right direction, a lot of good things can happen. 

And the tone set by the majority leader, Harry Reid, his invitation to Mitch McConnell to be a part of this.  And then, of course, asking myself and Judd Gregg to lead the effort here along with our other colleagues who played very important roles made it possible for this moment to come.  So I begin by thanking them for creating that tone. 

I‘d be remiss as well if I didn‘t also thank other people who are critically important in all of this.  Kent Conrad, certainly, and Max Baucus were invaluable.  Jack Reed and my committee, Chuck Schumer played a very important role, as well as the house leadership.  I know they are not done yet, but Barney Frank did a great job as well as, of course, the Republican leadership on the side of the House were working in all of this. 

The statistics and the things we‘re talking about, obviously the credit crunch and talking about the numbers, what‘s happened on Wall Street, the Dow moving around every day, what the credit markets are doing.  All of the statistics the people are mentioning and the effects of this on Wall Street foreclosures. 

But there‘s something even more profound and more serious about today than all of these numbers and statistics that you‘re bandied about.  It is the most important thing that we can do as a Congress, and that is to restore America‘s confidence and its optimism and its belief that their institutions of government can respond at a moment like this. 

Maybe more than anything else we‘ve done today, my hope is that that sense of confidence and optimism and belief that America can be back on its feet again.  We can solve this problem and offer that sense of hope that tomorrow can be a better day. 

We haven‘t done it all here, obviously.  There are a lot of things to come.  There‘s not going to be a blossoming tomorrow afternoon or Friday with the economy.  We‘ve got many, many difficult months ahead to get this right. 

But none of that could happen without the decision today.  And so the journey in front of us is going to be difficult and long.  But I think America tonight, I hope, saw our Congress, saw United States Senate acting the way the forebears and the founders intended it to act.  And I‘m deeply proud to have been part of this moment.  Judd?

SEN. JUDD GREGG (R-NH):  The ground has been covered, but let me add to it a little bit.  It was a pleasant and extraordinary experience to participate in this effort to address a crisis, which the American people were about to confront and which we hopefully have alleviated to a significant degree.

It came about because the institution of the Senate stepped up in a mature and responsible way under the leadership of Sen. Reid and Sen. McConnell and said, “We are not going to allow partisanship.  We are not going to allow differences which are real and substantive to divide us in this effort to pull together and come up with a solution to a problem which we all recognize is critical and which, if it isn‘t addressed, will lead to severe disruption of the lives of all Americans, especially those on Main Street.” 

I have to hold out special thanks to Chris Dodd.  He was the chairman of this exercise.  The chaired the committee, the meetings we had.  He was always fair.  He was always open.  He heard everybody‘s opinions.  And he pushed us toward resolutions, which would allow us to come out of the room knowing all the concerns have been addressed. 

And interestingly enough in this effort, they were addressed in a very positive way.  And I don‘t think anybody left that room not feeling that we have improved the bill and that the issues which their constituencies - (INAUDIBLE) for their constituencies have been effectively resolved and moved forward. 

Sen. Baucus putting the idea on the table early on that helped a lot in one of the most critical issues which was how we deal with excessive compensation, so his role is also critical.  On our side of the aisle, Bob Corker and Bob Bennett played an immense role in basically being the support for the efforts in the negotiation.  So this is the way government is supposed to work, folks and it did.  I think we can take a little pride in that.  Thank you.  Mike?

SEN. MIKE CRAPO (R-ID):  I think that we have turned the corner tonight in the Senate vote.  I think that the house will vote in favor of this legislation and we, as a country, are going to begin to pull ourselves together again in addressing this crisis.  This vote tonight, I think, is the turning point. 

Looking back on what happens, two, three, four, five, six months or several years from now that the vote will be tonight‘s vote in the United States Senate.  I‘m very, very proud, we, at the Senate, faced this challenge and looked it straight in the eye and we helped resolve it. 

I want to make a couple of points here.  We in the Senate, of course, do not like this to be thrust in our laps, this financial crisis that is caused by Wall Street and these lax regulations and (INAUDIBLE) greedy practices.  But we had to step up and then help solve it. 

We then took the proposal by the administration and looked at it.  We said no.  That‘s not what‘s not what we‘re going to pass through.  That‘s not right for the American people.  And as you‘ve heard tonight, working together as a team, again, led by Sen. Reid and McConnell and by Chris Dodd and Judd Gregg.  As a team, we sat down together, bipartisan basis and has said to the administration, “Uh-oh, this is going to work.  We‘ll make these changes.  This is going to right for the American people (INAUDIBLE), stronger oversights, better protection for American taxpayers. 

And again, as a team, bipartisan basis - we‘ve stepped up to it and found a good resolution with the administration.  And as a separate branch of government that‘s a responsibility.  I‘m very proud of what we did and this is going to mark the time when we turned the corner we will begin to see this financial crisis begin to abate. 

UNIDENTIFIED MALE:  We‘ll take no questions.  

UNIDENTIFIED MALE:  Thank you, everybody. 

MADDOW:  No questions being taken by the four senators who are addressing cameras, addressing reporter there is after this vote in the Senate.  The Economic Rescue Bill has passed the senate by 74 to 25 vote.  We just heard - it‘s interesting. 

The (INAUDIBLE) there Max Baucus whom you just saw, Democrat of Montana.  Judd Gregg, Republican of New Hampshire, Mitch McConnell, the Republican minority leader, of course, in the Senate, Chris Dodd, the Democratic chair of the Senate Banking Committee.  And the four senators introduced by Harry Reid who is the majority leader of the Senate. 

What we saw there was essentially - and forgive me here - but it was an ostentatious display of self-congratulation as it was an ostentatious display of bipartisanship.  There are 25 no-votes here.

And we will be hearing more over the course of this evening about why those 25 senators voted no, whether that signals still big problems ahead for the House‘s efforts to try to pass this bill.  We are hearing tonight that the vote in the House will likely happen, not tomorrow, but on Friday.  That said, a little caution on predicting anything.  Things have been moving in both fast and unpredictable ways. 

We‘re going to stay right on this and we‘ll be right back to MSNBC.  

(COMMERCIAL BREAK)

MADDOW:  Joining us now, MSNBC congressional correspondent, Mike Viqueira. 

He‘s on Capitol Hill tonight.  Mike, thanks very much for sticking with us.  

VIQUEIRA:  Sure, Rachel.  

MADDOW:  I‘m looking at this list of no-votes.  We had 25 no-votes, nine of whom were Democrats, 16 of whom were Republicans.  It looks to me at first glance like these are sort of ideological bookends of the Senate.  

VIQUEIRA:  Well, you know, that‘s exactly the way it worked in the House on Monday.  You know, the American political spectrum goes like this, people on the far-end on this side, people on the far end this side. 

And you know what?  What this bill has done is sort of twisted that bar into a circle so the two ends are together in sort of the populous middle, if you will.  I think Maria Cantwell - did she vote against this?

MADDOW:  Well, Cantwell did vote no on this.  

VIQUEIRA:  Yes.  I mean, people on the left who voted against this, who felt like it was $700 billion unjustified taxpayer money for the bailout of Wall Street.  We‘ve heard all the arguments all week long and then, I guess Thad Cochran in Mississippi is here on that list, too?

MADDOW:  He is, indeed.  

VIQUEIRA:  So you‘ve got someone on the opposite end of the political spectrum voting against this thing for largely the same reasons, really.  And that‘s what‘s so interesting about the politics of this thing.  I think the display that you saw there, outside the Senate chamber when those Republicans and Democrats came together.  You aptly described it, Rachel, because that‘s important. 

I mean, that shows a unified front and what that serves to do is build that momentum that we‘re talking about.  And I don‘t think 25 no-votes is really that big a deal.  Once you get above 60 in the Senate, it‘s all gravy after that.  Everything else is sort of icing on the cake. 

Seventy-four is certainly a substantial number in the United States Senate to get anybody to vote on - 74 senators to vote in favor of anything, I think, is a pretty big deal.  

MADDOW:  So bottom line, Mike, you think heading into the vote in the House which may be Friday could potentially be tomorrow but probably Friday.  You don‘t think tonight‘s vote is a signal of trouble toward that?

VIQUEIRA:  Absolutely not.  I think, it is a momentum builder and it really adds the pressure on the House.  

MADDOW:  Mike Viqueira, congressional correspondent, working late tonight here on Capitol Hill.  Thanks for following this stuff for us.  Good to have you on the show. 

VIQUEIRA:  All right.  

MADDOW:  Joining us now, also, is Michelle Caruso-Cabrera of CNBC who‘s here with us in New York.  Michelle, CNBC is reporting tonight that upon news of the vote that stock futures dropped some.  And I know you focus tightly on the economic issues at hand here, not so much on the political nuance, but I just have to ask you.  How topsy-turvy is the mapping of politics on to the economy here when, in order to get this thing passed, House Republicans, an extra hundred-plus billion dollars worth of sweeteners had to be added to the bill?  That doesn‘t sound like the caricature of politics that we usually understand.  

CABRERA:  Yes.  You know, normally I cover economic news, right, and so having to watch this (INAUDIBLE) get made is not necessarily that something that I‘m used to or that I think our CNBC viewers over there are all that interested in. 

I think what everybody found kind of amusing or disheartening through all of this is that the House Republicans were so upset about the spending, the size of the bill, et cetera, et cetera.  Now, they‘re upset about spending?  I‘ve been very far (INAUDIBLE) and for eight years I watched them pass every single bill and they spend money like drunken sailors.  And now, they want to get tough on spending?  That doesn‘t make any sense to me.  

MADDOW:  Well, they don‘t - I mean, they‘re complaining about the $700 billion just as every American is complaining about it.  They have a right complain about it.

But it is amazing that in order to get them on board, more spending and tax breaks had to be added to it.  It needed to be made less fiscally responsible in the narrowest sense of the term in order to get most Republicans (INAUDIBLE). 

CABRERA:  I understand the tax breaks.  When you have a weak economy, you want tax breaks because you want less government.  You want people to have more money in their pocket books.  We learned that during the Great Depression.  They started raising taxes to try to balance the budget.  That was a big, big mistake.  So I‘m one of those folk who believe you lower taxes, you maybe - will bring in more revenue.  

MADDOW:  If you look at the blue dog Democrats saying if you‘re going to cut taxes, you‘ve got to pay for it some way.  This is not the time to worry about the credit crunch to add those hundreds of billions of dollars extra to take that away from the available credit out in the world.  

CABRERA:  Agreed.  Everybody ought to focus on what do they want the end result to be?  If you want to ease the credit crisis, what can you do to get this done?  And instead, they had, all of a sudden, the junk in there.  That‘s why I cover business instead of politics.  

MADDOW:  Well, I know.  The junk is really where the interesting stuff is

depending on those -

CABRERA:  With arrows in Oregon.  If you don‘t know what I‘m talking about, Google them. 

MADDOW:  The wooden arrows that they make for children? 

CABRERA:  Yes.

MADDOW:  The most amazing thing to me about that is that who knew they were still making wooden arrows for children? 

CABRERA:  And do I want my kid playing with wooden arrows?  I don‘t know.  

MADDOW:  They are getting a tax break in this.  There is still the question at hand about whether or not those sweeteners are going to be unappealing to House Democrats.  House Democrats - The blue dog caucus is saying, “I don‘t want them unless they are paid for.”  There‘s going to be a lot of drama heading into Friday. 

And I expose - eyes mostly just on the stock market in terms of seeing

looking for a reaction.  Is there any other indicator specifically, Michelle, quickly, that you will be looking for other than just what the market does as a whole?

CABRERA:  We want to see what happens.  What we can‘t show you - we can show you the Dow - that‘s easy, right?  We want to see what‘s happening in the credit market - that‘s harder for us to document and show to individuals.  But we‘ll be talking to lots of people on the trading desks to see exactly if it‘s finally moving.  

MADDOW:  CNBC‘s Michelle Caruso-Cabrera, it‘s great to have you and your advice on this tonight.  Thank you.  

CABRERA:  Pleasure.  

MADDOW:  And thank you for watching tonight.  Repeating the news of this hour, the United States Senate has passed the Economic Rescue Bailout Bill by a vote of 74 to 25.  We‘ll see you back here at 11:00 p.m. Eastern tonight, live for a wrap up of it all.  “COUNTDOWN WITH KEITH OLBERMANN” starts right now.

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