updated 12/9/2008 12:44:24 PM ET 2008-12-09T17:44:24

Guests: Jennifer Granholm, Mark Sanford, John Harwood, Eugene Robinson, Pat Buchanan, Troy Clarke, Mort Zuckerman, Ron Brownstein

DAVID SHUSTER, HOST: Tonight, limited warranty. Congress sends the Bush administration a short-term bailout for the big three automakers. The proposal would transfer power from Detroit to Washington and would leave the future of the U.S. auto industry in the hands of the next occupant of 1600 PENNSYLVANIA AVENUE. Forty-four days until the inauguration of President-elect Obama. Welcome to the show. I'm David Shuster. The headline tonight is "Bailout Showdown." For most of this day, it appeared that Congress and the Bush administration were on track towards an agreement that would give GM, Chrysler and Ford about $15 billion and keep the automakers alive, at least for a while. But late this afternoon, the White House received the actual proposed legislation and said it didn't like the language in the bill, and that prompted a vigorous defense a short time ago from House Speaker, Nancy Pelosi, noting that everybody in the bill would share the pain.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: We call this the barbershop. Everybody is getting a haircut here in terms of the conditions of the bill. If labor has to take a haircut because of concessions and expediting concessions, bond holders have to take a haircut as to what the return on the dollar is for them, shareholders have to take a haircut, and the management itself has to take a big haircut on all of this.

(END VIDEO CLIP)

SHUSTER: Pelosi said the negotiations continue. As it stands, Democrats have backed away from their demands the loan money come from the $700 billion Wall Street bailout approved a few months ago and instead, as President Bush has insisted, the lawmakers have agreed the funds should come from a separate program helping the automakers improve fuel efficiency. The bill would also create an oversight board with broad authority and power of the restructuring of the auto industry. The head of that board will write out guidelines the big three must follow. If the automakers don't follow the overhaul guidelines, their money could be recalled in March.

(BEGIN VIDEO CLIP)

SEN. CHRISTOPHER DODD (D), CONNECTICUT: Appointing a strong, for lack of a better word that gets used to frequently, a czar kind of figure here by the president-elect that would allow us to really make the decisions, along with the auto industry, prior to them getting any additional funding. You can't give out the money and then expect changes to occur. And there would be no limitations, in my view, in terms of what this auto czar could do in terms of recommending the kind of changes we need.

(END VIDEO CLIP)

SHUSTER: The legislation taking shape today isn't exactly what the CEOs of the big three automakers probably had in mind when they testified to Congress last week. Much of their power would be taken away. The big restructuring decisions would be out of their hands. And it's possible the oversight board would demand the CEOs be let go as part of the industry overhaul. And then, of course, there is the White House, which doesn't like the idea of giving any money until the companies take concrete steps first. For reaction, we are joined by Michigan Governor Jennifer Granholm, a Democrat who has repeatedly urge that Washington take strong action to help the big three. And Governor Granholm, first of all, what do you make of the White House now suggesting they don't like this legislation, a possible snag here in negotiations?

GOV. JENNIFER GRANHOLM (D), MICHIGAN: Well, I'm assuming that it's just a snag. I think everyone agrees that it is critical that this industry survive. That's good news. Whether it's the House or the Senate or the incoming president or the current president, every one of them has said that the auto industry is too important to our nation's economy to fail. So that's the good news. There is always back and forces on legislation, as you know, David. So I'm expecting that that will continue. They'll work on it through the night. But the good news is that there seem to be a narrowing of issues, and some clear, defined terms like a trustee, like a limit on the amount of money, like the fact that it gets to the next administration. I think that there are some aspects of this bill that everyone agrees on.

SHUSTER: Governor, are you OK with the management of GM, Ford and Chrysler all being stripped away?

GRANHOLM: Stripped away meaning-I don't know that the bill requires them to step down, but I do think that everyone wanted conditions to be placed on this. And as Nancy Pelosi said, everyone is going to take a haircut. I think that's very true. But you know, this is an issue that is bigger than one particular person. This is an issue that's important to the nation as a restructured industry, especially...

(CROSSTALK)

SHUSTER: So, in other words, if negotiators were to say-look, if negotiators were to say, we can get this thing passed but we need for Rick Wagoner, the CEO of GM, to step aside, would you support that?

GRANHOLM: I would support whatever it takes to make sure that the industry is able to survive. And I think Rick Wagoner would support whatever it would take for GM to survive.

SHUSTER: All right. Now, as you know, the issue that the White House brought out today was this issue of viability. They don't want to spend money on automakers that they think may not be viable. Here's what Nancy Pelosi said today in response. Watch.

(BEGIN VIDEO CLIP)

PELOSI: Come March 31st, it is our hope that there will be a viable automotive industry in our country with transparency and accountability to the taxpayer. We think that is possible.

(END VIDEO CLIP)

SHUSTER: Governor, do you think it's possible for this automotive industry to be viable by March, just three and a half months?

GRANHOLM: I think that it's possible certainly to have a plan for viability well into the future. It must happen. This nation cannot survive without a viable manufacturing infrastructure. And this auto industry is going to be what it takes to get us the electric vehicle and energy independence. We need this as a nation and it's why other nations have been investing in their auto industries. It's critical to our future.

SHUSTER: Well, I would say, though, there is a difference between a viability plan and viability. But let's put a finer point on it. Here's what Senator Bob Corker was suggesting at the hearings last Thursday, the Senator, Republican senator from Tennessee, about the overall health of the auto industry. Watch.

(BEGIN VIDEO CLIP)

SEN. BOB CORKER ®, TENNESSEE: There is nobody that I know of that thinks that three companies with the market share that you have, the downward trend that exists, the unsustainable debt that's out there, there is nobody, no thinking person thinks that all three companies can survive.

(END VIDEO CLIP)

SHUSTER: Governor, what is your reaction to Senator Corker?

GRANHOLM: My reaction is that this auto industry would not be before Congress today were it not for the financial meltdown. They did not cause the financial meltdown. They are the victims of the fiction meltdown just like everyone else is. People cannot access credit. What they're asking for is a loan to get them from the point where they are today, which is in the middle of a vast restructuring, to the point where this financial crisis has been dealt with. I mean, to say that they don't sell any viable cars or that they're not producing vehicles, I mean, General Motors has the Green Car of the Year, the Motor Trend Car of the Year, and the car that is at the top of the J.D. Power survey. So, I mean, the bottom line is-for us-is that we need this industry to survive. The support will get them across the finish line. They agree to restructure. They will agree to conditions. Let's just make sure the industry survives because it means three million jobs in this country.

SHUSTER: Michigan Governor Jennifer Granholm, a Democrat. Governor Granholm, good of you to join us tonight. We appreciate it.

GRANHOLM: You bet, David. Thanks.

SHUSTER: Now let's turn to the other side of the aisle. And joining us now is Republican Governor from South Carolina Mark Sanford. Governor, you've spoken strongly against a government bailout. You just heard what the governor of Michigan said, that we need to save the auto industry. What is your reaction to her?

GOV. MARK SANFORD ®, SOUTH CAROLINA: Well, I don't begrudge her. I mean, she comes from Michigan, and therefore she is watching out for folks that are there in her home turf. But I think you've got to distinguish between the automotive industry in Detroit and automotive industry that exists across this country and a lot of other places, and happens to be doing much better than Detroit, whether that's BMW in Greenville, or the Toyota plant in the Southeast, or go to Hyundai, or go to a long list of different plants across this country that are in strong contrast to what you see unfolding there in Detroit.

SHUSTER: Well Governor, let take that very point. I mean, what the federal government wants to do is essentially give some help to Detroit. Isn't it true that South Carolina gave some incentives, gave some help to BMW for that plant that is now employing 4,500 people in Greenville-Spartanburg?

SANFORD: Yes, back in 1993, to move here and build the first manufacturing plant in North America. In other words, it was inducement to come out of Germany, which is where they had been. But beyond that...

SHUSTER: Right. Again, but with very different union rules than what they have in Michigan.

SANFORD: Absolutely right.

SHUSTER: I mean, the argument is that Michigan is not on a level playing field. But again, you gave them some incentives. You essentially undercut the unions by bringing these jobs to South Carolina. And the argument is that you want the Detroit automakers to fail because that would be good for business for BMW, a company that has a big plant in your state. How do you respond to those criticisms?

SANFORD: No, no, no. I don't want anybody to fail. And my interest is as an American taxpayer.

At the end of the day, my wife and I have four boys. And this bailout psychology of one bailout after a bailout after a bailout-and mind you, there's a big difference between a bailout to a company that's failing and an inducement, an encouragement to get a profitable company to come to your shores and to come to your state. And so my interest is not for or against BMW, not for or against, frankly, the big three in Detroit. But rather, it is for this larger notion of fiscal sanity. We've got $52 trillion of accumulated liability at the federal level. And the idea of stacking more debt on top of more debt as a way of solving a problem that was created by too much debt to me is nonsensical. I would also say this, if you do not go the bankruptcy route, and the restructuring that comes with that, at the end of the day the American taxpayer is going to be the sucker at the birthday party in this "bailout" of the big three, because without bankruptcy, you never end up as a preferred creditor. We will be subordinated to a whole bunch of other creditors in the "loan," but will prove to be bailout of the big three in Detroit.

SHUSTER: But Governor, doesn't bankruptcy suppose that people would continue buying cars just the way people have continued buying airplane tickets on United, which declared bankruptcy? I mean, here's the latest poll from CNBC. "Would you buy a car from an automaker in bankruptcy?" Fifty-two percent say no, 37 percent say yes, 11 percent say not sure. How can the auto industry possibly survive in bankruptcy when half of the public wouldn't buy a car from a company that's bankrupt?

SANFORD: But again, we've all been around the polls and always the catch is in the way that you answer the question.

SHUSTER: Right. There were some polls that had it as high as 75 percent of people said-go ahead.

SANFORD: Yes. But with regard to what people have actually done with companies in bankruptcy. I would argue that it is a much riskier decision. Are you going to plunk down some cash on a car or are you going to put your life in jeopardy when you get on a United airlines flight? And in fact, overwhelmingly, what people did post-bankruptcy with United Airlines was to get on the flight. They're doing that most recently here with Circuit City, which, you know, again, filed Chapter 11, filed bankruptcy. People are still going and buying Christmas presents, which is not the same. But when you actually talk about getting on a flight where you "risk your life," and yet people choose to make that investment decision, it says to me that somebody asked the question wanting to get a certain answer with regard to what they would or wouldn't do with the big three.

SHUSTER: Right. Except, Governor, as you know, there are different issues in terms of safety that govern the airlines than the automotive industry. And the fact is, it's a much bigger expense when people think about buying a car than buying any one particular airline ticket. In any case, Governor Sanford, good of you to join us tonight. You're a very effective advocate. And certainly a lot of things going well for you in South Carolina. And thanks for joining us tonight.

SANFORD: My pleasure. Thank you very much.

SHUSTER: There's more ahead on 1600.

President-elect Barack Obama unveils a massive new public works plan aimed at jump-starting the economy. Our political panel weighs in on the idea. Plus, should the leaders of Detroit's big three get a bailout? And if they do, should they step aside and let someone else move forward with their companies? I'll ask one of the executives from General Motors, still ahead.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: As tough as times are right now-and things are going to get worse before they get better-there is a convergence between circumstances and agenda. The key for us is making sure that we jump-start that economy in a way that doesn't just deal with the short term, doesn't just create jobs immediately, but also puts us on a glide path for long-term, sustainable economic growth.

(END VIDEO CLIP)

SHUSTER: That was President-elect Obama on "Meet the Press" saying it will get worse before it gets better. Let's put this to our all-star panel: "Washington Post" columnist and associate editor Eugene Robinson; MSNBC political analyst Pat Buchanan; and CNBC chief Washington correspondent John Harwood. The pillar (ph), of course, of the U.S. economy, manufacturing. It all involves, of course, the auto industry. I want to play for you something that Dana Perino said at the White House earlier this afternoon. Watch.

(BEGIN VIDEO CLIP)

DANA PERINO, WHITE HOUSE PRESS SECRETARY: It sounds like we have agreement on those basic principles that would be required for a bill that the president could sign.

(END VIDEO CLIP)

SHUSTER: And then we heard, Pat, no, we don't. What's going on?

PAT BUCHANAN, MSNBC POLITICAL ANALYST: They've got the basic principles right, but they've got a few problems in this thing. I think that the White House probably does want some additions in that legislation. I think they're sticking it to the Congress a little bit. This is unpopular in a lot of precincts, this bailout of the auto industry. They want to lay it on the Democratic Party. I think that's it. But I cannot believe that the administration would not give a pass through until the new year for an auto industry which is critical to the economy of this country.

SHUSTER: And yet, is there anything for the White House to lose? I mean, they essentially don't have a horse in this race. If it were up to them, well, you know what? You can either take it or leave it as far as this money you've already appropriated.

EUGENE ROBINSON, MSNBC POLITICAL ANALYST: Yes, but I actually agree with Pat. I don't see what's in it for the White House to leave the incoming administration with a completely destroyed and bankrupt auto industry. It seems to me to be in the interest to keep it going for a couple of months until the new president takes office. It doesn't cost, in context, all that much money. You know, a few billion here or there. These days, it's small compared to...

SHUSTER: John Harwood it seem like a key sticking point now, is this issue of viability. Can the automakers prove by March that they are viable? What does that essentially mean? And what is it that the Congress is having to cough up now to satisfy the White House in this part of it?

JOHN HARWOOD, CNBC CHIEF WASHINGTON CORRESPONDENT: Well, they're trying to adjust the language, adjust the kind of oversight. The White House is insisting on a single overseer, as opposed to a board composed of various cabinet departments and officials from various parts of the government. And the White House is actually succeeding in getting the terms they want from Congress. It's striking, David, that despite President Bush's very, very low approval ratings and the fact that he is a hyper lame duck at this stage of his presidency, he insisted that this money come out of the previously appropriated $25 billion and he made it stick. Congress is responding to him, and they're going to respond to this statement by the White House later this afternoon that they need some tougher accountability language. The Democrats are going to do it. They just want to get through the year. I do think the horse to ride-as Gene was just suggesting, there is a legacy horse for President Bush to ride. Does he want to have in his last month in office, given the current economic situation of the country, does he want it on him that General Motors went bankrupt in December? I don't think he does, but I think for the reasons that Pat said, it's very unpopular among conservatives. They're going to try to drive the hardest bargain they can, realizing that Barack Obama is going to pick it up in January.

SHUSTER: And just to underscore how close it seemed like there was a deal today, here was Barney Frank, in charge of the House Banking Committee, a lead negotiator. Here he was on CNBC earlier today.

(BEGIN VIDEO CLIP)

REP. BARNEY FRANK (D), MASSACHUSETTS: Before the week is out, we will have sent it to the president's desk, and he will have signed a short-term loan beginning the process of significant restructuring, insisting on concessions from all parties, and increasing, we hope, energy efficiency, beginning that process, that it will get them until March, at which point the new administration can pick up from there.

(END VIDEO CLIP)

SHUSTER: The Democrats just want to get it to March, when they'll obviously have the votes to do more. So what more concessions, Pat, can the Bush administration squeeze out of them in the meantime?

BUCHANAN: I don't know what more they can squeeze out of them, but I'll tell you, this is a long-term problem for the country, because I don't believe the auto companies, quite frankly, given the current trade environment they're experiencing with the Chinese cutting-and they're having their autos coming in soon. The Japanese practicing protectionism of their own. The Europeans rebating on sales to the United States, their VAT tax.I don't think the United States auto companies can survive in that global environment. Ultimately, a Democratic Congress and President Obama are going to have to address these trade deals which are not only killing automobiles, but have killed virtually every manufacturing industry in the United States.

SHUSTER: Eugene?

ROBINSON: Well, they're also going to have to restructure the auto industry in a way that it doesn't want to do for itself. So the good news is they get to March, the bad news is they get to March, because in March, you know, GM, it's probably just going to be Chevy and Cadillac. What happens to the rest of GM? What happens to Hummer? There are myriad problems. And where is the Steve Jobs of the auto industry who's going to come in and design the iCar that everybody's going to want to buy? Where are they going to find him or her? How are they going to get them installed? It's a huge task.

SHUSTER: And John Harwood, we started the segment with Barack Obama saying on "Meet the press," as tough as time are now, things are going to get worse.

HARWOOD: He's right about that.

SHUSTER: I suppose it's a dose of reality. Yes, a dose of reality, but isn't there also some political leverage he can play out of that for his broad publics work program? I mean, never mind whatever political capital he spends on an auto bailout. He wants to pass perhaps $600 billion or $700 billion in infrastructure improvements.

HARWOOD: No question about it, he's got a very powerful locomotive to pull his agenda through the Congress, talking about tons of money for infrastructure, for alternative energy, for all these sorts of pent-up projects the Democrats have wanted to pursue. And now they have got the means to do it. It's convergence, as he told Tom Brokaw, of circumstance and agenda. One of the questions is going to be, I think, not the size-less the size of the package, but what gets into it. You're going to see big fights on Capitol Hill over what qualifies, meets the standard that President-elect Obama laid out of a project that contributes to our long-term growth. I do think one postscript on what Pat was saying about China, it's worth pointing out that GM is number one in terms of car sale in China. So certainly, that market in developing countries, China and elsewhere in Asia, is going to be part of the solution.

BUCHANAN: Yes, you cannot give the United States-let your auto industry go up and give up that extraordinary market. It's going to explode in India and China and Southeast Asia. But as for this package, this stimulus package, you call it, an infrastructure is a synonym for earmarks without end. We're talking roads, bridges, dams, schools, public buildings.

SHUSTER: You're against universal Internet (ph), Pat?

BUCHANAN: This is wonderful.

SHUSTER: We're going to get your name on a bridge. Don't worry.

(LAUGHTER)

BUCHANAN: Everybody is going to get their name on a bridge.

SHUSTER: Pat, Gene and John are staying with us. We'll have more from our panel later on in the show. But still ahead on 1600 PENNSYLVANIA AVENUE, could there be a place in an Obama administration for former Vice President Al Gore? Plus, they don't see eye to eye politically, but it appears President Bush and one of his critics, singer Barbra Streisand, kiss and make up. Well, at least for one night.

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SHUSTER: We're back with a look at what's going on inside "The Briefing Room."The Supreme Court has turned down an emergency appeal from a New Jersey man who says Barack Obama is ineligible to be president because of his birth records. The man claimed that since Obama had dual nationality at birth, he can't possibly be a true natural born citizen. Obama's mother was American and his Kenyan father at the time was a British subject. The court did not comment on its decision to turn down the appeal. NBC News is learning about an intriguing transition meeting set for tomorrow in Chicago. President-elect Obama is scheduled to meet with Al Gore to talk about energy and climate change issues. Obama has said in the past that he's wanted to give Gore a major role in his administration to address global warming. And here's something we thought we would never see, the president and Barbra Streisand, one of his most vocal critics, exchanging a friendly kiss. Talk about awkward. The smooch came during a White House reception for the recipients of the Kennedy Center Honors. Before the reception, Streisand told reporters, "Art transcends politics this weekend. Hmm.Coming up, President-elect Obama is starting to hear the groans from the liberal left. The left wing is increasingly anxious and frustrated as he prepares to take office. We will tell you how the president-elect and his team are responding. Plus, from senator to secretary. Will Hillary Clinton's Capitol Hill experience, as well as her experience as first lady, help or hurt her at the State Department? We will talk with somebody with an unusual and intriguing point of view.

1600 PENNSYLVANIA AVENUE returns in a minute.

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SHUSTER: Tonight, U.S. automakers are on track to get a temporary lifeline but under what conditions? And many taxpayers aren't pleased about the government cutting another bailout check.When this temporary injection runs out in March, it may cost President Obama and the Democrats some political capital once they're in charge at 1600 PENNSYLVANIA AVENUE.Welcome back to 1600 PENNSYLVANIA AVENUE. I'm David Shuster. Late today top Democrats in Congress held a news conference at the Capitol to say a proposal to provide $15 billion to U.S. automakers is on track despite some White House reservations. But the lawmakers emphasize this bailout won't be a free ride for the Big Three.

(BEGIN VIDEO CLIP)

REP. BARNEY FRANK, (D) MA: All of them are going to have to make some sort of sacrifice in this. There have been to be contributions from all sides and they will to have demonstrate by March 31st, that based on this they can go forward in an efficient way and producing cars that we think will sell.

REP. NANCY PELOSI, (D) CA: It is important to note, unless the restructuring that's called for in this legislation, and the goal of viability is achieved by March 31st, there is no justification for spending any more taxpayer dollars.

(END VIDEO CLIP)

SHUSTER: Joining us now is Troy Clarke, he is the vice president of General Motors and president of GM North America. Mr. Clarke, before we get into this issue of viability, and these specific plans that are emerging, there is a big buzz now in Washington about whether the CEO of General Motors, Mr. Wagoner, should stick around. Here is Chris Dodd, who as you know is the Senate Finance Committee chairman. Here he is on an influential Sunday show over the weekend. Watch.

(BEGIN VIDEO CLIP)

SEN. CHRIS DODD, (D) CT: If you're going to really restructure this, you have to bring in a new team to do this, in my view and that's - and these are .

BOB SCHIEFFER, CBS NEWS: Would that be part of the condition of any bailout?

DODD: I think it is going to have to be part of it. And there are different positions. GM is probably in the worst shape. Chrysler is I think probably gone, ought to be merged. Ford is fairly healthy. So we don't want to brand all these companies exactly the same way. But nonetheless, if you're going to restructure and have a viable manufacturing sector in our country .

SCHIEFFER: So what you're saying about GM is that Rick Wagoner, the chairman, has to go.

DODD: I think he has to move on.

(END VIDEO CLIP)

SHUSTER: Mr. Clarke, is it OK if Mr. Wagoner moves on?

TROY CLARKE, GENERAL MOTORS VICE PRESIDENT: Well, you know, we certainly appreciate very much Senator Dodd's interests and his personal efforts with regards to sponsoring this rescue effort for the American auto industry. But I think I speak on behalf the employees of General Motors, our suppliers. I know many, many of our dealer, we think Rick Wagoner is the right guy for the job. We think Rick Wagoner, in fact, kind of when you look at the tail of the tape, Rick has been in fact the initiator of some pretty substantial changes in the last several years that are really the basis of the turn-around plan or the restructuring plan that we put before Congress and think he is the guy who needs his hands on the controls at this critical time.

SHUSTER: Mr. Clarke, can General Motors prove its viability by the end of March?

CLARKE: I believe we can. I believe we can. The plan that we submitted to Congress is pretty comprehensive in scope. And in fact we called it our viability plan. I think we stated in there some assumptions with regards what the future market looks like. We believe those assumptions are fairly conservative. And if in fact those assumptions aren't met, that's really the purpose of the line of credit in addition to the $12 million term loan. I think that when you look at the plan, it will be viewed in the proper light. And we believe it is a very strong plan for viability of General Motors.

SHUSTER: What do you make of the plan that's emerging out of congress? That there would essentially be an auto czar, a board that would oversee the massive overhaul essentially stripping the power away from Detroit and placing it in the hands of this board here in Washington. Is that okay with General Motors?

CLARKE: Actually, we're very supportive of the concept. We recognize in these very unique times that the taxpayers' interests have to be maintained. And that there are certain conditions that have to be met. And we comprehended the thought that there would in fact be some form of rigid oversight. And we're very prepared to work with an oversight board and certainly work within the framework that they might construct.

SHUSTER: But it is not just oversight. This is a board that would prove any sort of decision or make any decision that involves more than $25 billion. I mean, can that sort of thing really happen in this environment? You know General Motors and how complicated the company is. Can an independent sort of oversight board chairman jump in and say, yes, General Motors, you can build this model but no, you cannot build that model. Will that work?

CLARKE: I think David - I think you just a little misspoke there. I think every decision over $25 million. But yes, I think so. I think as we have laid out in this viability plan, we believe are plans to become really focused. Really leaner, really absolutely dotting the Is and crossing the Ts in the context of a pretty comprehensive competitiveness program. I think within the context of that framework, being able to look at those types of decisions or those kinds of increments, I believe, will be, I don't want to say easy but they'll certainly make a lot more sense and I think we'll be able to delineate very quickly, whether moving the company on the right path or not.

SHUSTER: Troy Clarke, vice president of General Motors. Thank you very much. We appreciate you joining us tonight.

CLARKE: Thanks for having me, David.

SHUSTER: For more on the bailout and how President-Elect Obama will be handling the economic crisis he'll be inheriting in 44 days, let's bring in Mort Zuckerman, chairman and publisher of the "New York Daily News" as well as chairman, editor-in-chief and publisher of "U.S. News & World Report." And Mort, Mr. Clarke was right. It is $25 million. Anything above that, this board would approve. Do you think that an oversight board can jump in at that level of detail and dictate what the automaker should be doing over the next six months to a year?

MORT ZUCKERMAN, "U.S. NEWS & WORLD REPORT" PUBLISHER: To be perfectly honest with you, I'm very dubious about the role of an oversight board. I suppose on some level, there would have been would have to be some agreement on the part of a government to have the conditions they are set forth, being met. It is hard for me to imagine how there could be somebody in a group of people on an oversight board who would understand, enough of that industry that they'll be able to make decisions at that level of detail. Having said that, I think it is really critical that there be some understanding as to what those conditions are. Particularly with respect, for example, to reducing the number of dealers to reducing the labor costs per hour because they're way above. We should remember that the foreign auto companies now make up 52 percent of America's automobile industry. The Big Three, as we used to call them, are now producing less than a majority of American cars. There has got to be some comparison between what they do and in terms of cost and what these other companies for them to be competitive and therefore to be viable. Unless they are competitive, they will not be viable. So there will have to be drastic reductions in cost.

SHUSTER: Is there an issue, though, of fundamental fairness that may be at play politically? There is some question about whether the AIGs of the world, whether their situation has improved that much despite the injection of the $700 billion, or at least part of it that the federal government approved a few months ago. And yet we're essentially asking the auto makers to jump through hoop to try to prove they deserve $15 million.

ZUCKERMAN: $15 billion.

SHUSTER: Billion. Sorry.

ZUCKERMAN: I do think-those numbers get to be so big. It is hard really to measure them. The essential part of what is going on in the financial world, that is critical to the functioning of our entire economy. The financial world takes money from where it is and invests it or lends it where it needs to go. Our entire economy rests on credit! We will not be able to sell cars if there is the basis on which the financial units in the industry like GMAC who provides a great deal of financing for GM cars and for Chrysler cars. So credit is absolutely critical. Having said that, if you know what happened with company like AIG, and we have a ridiculous amount of money invested with them. They're going to have $130 to $150 billion in one company. The fact is that they are so intertwined and interconnected with the rest of financial world, that were they to go under, it would create catastrophe for us. Because the entire financial world would freeze up to a degree that would make it impossible for credit to be extended throughout the economy. General Motors, on the other hand, is a specific player in a specific industry. And that industry is not going to end, even if all these three American companies disappeared. The foreign owned manufacturing companies, who seem to be doing these cars for reasons of late arrival in the industry at lower costs, but certainly much more responsive to the American market than you would think they are, vis-a-vis the American companies. There is just going to have to be a fundamental transformation in the American car companies. Mr. Wagoner, I think, is a very competent man. Nevertheless that company has not done well in the last eight years. There will have to be genuine oversight to make sure certain financial conditions are met for any additional credit to be extended. No wonder the American public is upset this bailout. Every industry in the country wants to be bailed out. A lot of industries aren't doing well. Why should the automobile industry be unique? This is a question that everybody is asking. I would like to be bail out. We're in the media business as you know. It is pretty tough to be in the media business. We don't think we're going to be bailed out.

SHUSTER: Indeed. Mort Zuckerman, chairman and publisher of the "New York Daily News" as well as chairman, editor-in-chief and publisher of "U.S. News & World Report." And Mort, thanks for joining us.

ZUCKERMAN: You're very welcome.

SHUSTER: Up next, Democrats are abuzz with the possibility that Caroline Kennedy has shown interest in the New York Senate seat. Not everyone is happy with the idea of another Senator Kennedy. You're watching 1600 PENNSYLVANIA AVENUE.

(COMMERCIAL BREAK)

SHUSTER: Welcome back. Caroline Kennedy has reportedly expressed interest in replacing Hillary Clinton in the U.S. Senate. With Uncle Ted Kennedy lobbying New York Governor David Paterson's office in her behalf. Cousin Kerry Kennedy had this to say to MSNBC today.

(BEGIN VIDEO CLIP)

KERRY KENNEDY, CAROLINE'S COUSIN: I think Caroline would be just a tremendous senator. She's a wonderful public servant. Teddy and Caroline are so incredibly close. And I can't imagine a better team than the two of them in the Senate from Massachusetts and from New York.

(END VIDEO CLIP)

SHUSTER: Paterson, who will ultimately choose Clinton's successor, joked about all the politicos who are weighing in saying, quote, "They are blowing up my cell phone." "Hello, Governor, it's David Paterson here. I'm calling to remind you that things would be a lot easier if you appoint yourself to the Senate seat." Back with me now, the political panel, "Washington Post" columnist and associate editor Eugene Robinson, MSNBC political analyst Pat Buchanan, and CNBC chief Washington correspondent John Harwood. The reason I bring this up with Caroline Kennedy is because it does underscore there is a growing divide between the liberal left which feels like the establishment part of the Democratic Party, the entrenched interests, are taking over. Eugene, is that what is happening?

ROBINSON: I think you do have to distinguish. This isn't Barack Obama's call, for example. The Cabinet appointments are his call. And that's a discussion that the left legitimately will have with the incoming administration.This is David Paterson's call. I would hate to be David Paterson. Or at least I'd turn off my cell phone. And once again, a terrific blog today from Jane Hampshire at firedoglake.com. And again referring to the issue of David Paterson and who should fill Sen. Clinton's seat and whether it should be Caroline Kennedy. Quote, "It's a truly terrible idea. Her leadership could have been really helpful when the rest of us are trying to keep the progressive lights on and getting the stuffing beaten out of us by a very well-financed right wing for the past eight years. But when things were tough she was nowhere to be found. The new Senate is going to face incredible challenges in the upcoming session. It's not a place for anyone to be wearing political training wheels. John Harwood, in the grand context, is this a legitimate issue for the Democrats on the left to be-up set about?

HARWOOD: The issue is Caroline Kennedy somebody with the temperament and desire and want to take the seat by appointment but to fight and hoed nature special election and then a regular election after that? That's not an easy thing. Of course, the left has got to realize if they want Democrats to have a maximum amount of political stroke for Barack Obama, they need to hold the seat. Somebody like Caroline Kennedy has a lot of political juice if she decides this is a course she wants to take her life. There is no evidence in her life up until this year that she wants to be a public person. Could that be changing? Maybe so.

SHUSTER: But Pat, won't Republicans have a field day if Caroline Kennedy gets the seat in this fashion?

BUCHANAN: I don't think they will. I think they will look at that as an opportunity. I hope she doesn't take it. I agree with John. I've seen nothing in her disposition or temperament or experience to show a real desire to get into public affairs and political issues and the rough and tumble of politics. I can't see her up there at night in American Legion Halls in Buffalo rallying the troops and all the rest of it. She is a very poise asked lovely lady. Some of the other Kennedys, frankly, the cousins, I think they're more attuned to this. As for that blogger, I would tell those liberals, I know how the right wing used to feel under Nixon and even under Reagan. Deal with it.

SHUSTER: Speaking of deal with it, I want to read for you. There is this whole issue, a lot of the bloggers are going crazy because of these center picks that Obama is making in his Cabinet, especially national security. And Steve Hildebrand from the Obama campaign responded today in a missive that got everybody talking at least on the left. He said "This is not a time for the left wing of our party to draw conclusions about the Cabinet and White House appointments that President-Elect Obama is making. Some believe the appointments generally aren't progressive enough. Having worked with former Senator Obama for the last years, I can tell you that isn't the way he thinks, and it's not likely the way he will lead. After all, he was elected to be the president of all the people, not just those on the left." A lot of people on the left took this as sort of a dismissive slap.

ROBINSON: Did people listen to Barack Obama when he was campaigning? He did not campaign as some sort of far lefty by any stretch of the imagination. The McCain campaign tried to portray him that way but that's not what he said. It was always a pretty moderate, even socially conservative campaign in many ways. I think that's who Barack Obama is. I think he is extremely progressive on some issues but there is a much more centrist side to him and why didn't he listen to what he was saying which was how we're going to govern.

HARWOOD: There is another reason why that complaint from the left is insane. That's because, has Barack Obama abandoned or jettisoned any of his campaign promises so far? Dramatically expanding health care? Cutting tax for middle and lower income workers? Dramatically spending alternative energy?

SHUSTER: What about windfall taxes on the oil companies? He's abandoned that. Some on the left are suggesting .

HARWOOD: The windfall profit tax was conditioned on the level of oil prices and oil prices have fallen below that level. My point is he hasn't jettisoned any of this stuff. Unlike Bill Clinton who had tossed the middle class tax cut overboard by the time he became president, Barack Obama hasn't. You can get all agitated and hot and bothered about husband appointments. But Barack Obama is the quarterback of the team. And he hasn't said, in fact, his stimulus program is getting bigger over time. Not smaller. He has indicated he might let the Bush tax cuts expire. That's a one-year difference versus trying to get it repealed in 2009. But it's not really a point of principle.

BUCHANAN: I agree with John. I think he has a very centrist team but I believe he will get out of Iraq. Maybe it will take a little longer. I think he will do everything he said except for that tax increase on the well to do. Which he shouldn't do. You don't need a wind fall profit tax when wind fall profits are gone.

SHUSTER: And yet, a lot of people on the left still are looking for that appointment that would represent them.

BUCHANAN: Well, the appointments have been centered in the Democratic Party and center right. No doubt. That is going to give Barack Obama cover, I think, to do the things he will do. I think his heart is on the left. It his head is on the center. His head is on getting reelected which is where it ought to be.

SHUSTER: Eugene, last word.

ROBINSON: Obama has made it clear. He is the one who is going to be making the decisions and as John said, he has kept to his campaign promises so far. Let's see what he does when he gets into office and we'll see if he does what he says or not.

SHUSTER: All right. Eugene Robinson, Pat Buchanan and John Harwood, thank you very much.

And again, we are going to have Jane Hamsher from FireDogLake who is taking issue with the way Caroline Kennedy seems to be getting closed to the Senate seat. We'll have her on tomorrow. But up next, Hillary Clinton. She has more star power than any other secretary of state in recent history. Could that help or hurt her in her new role at the State Department?

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I just want to say how happy we are to be back in your lives, American. You voted for change but you ain't never going to change this.

UNIDENTIFIED FEMALE: We Clintons are here to stay. You may think we're down, but like the South, Vampires and Britney Spears, we will rise again.

(END VIDEO CLIP)

SHUSTER: Welcome back to 1600 PENNSYLVANIA AVENUE. That was Amy Poehler making a surprise appearance as Hillary Clinton this weekend on SATURDAY NIGHT LIVE.The real Senator Clinton dines tonight at the Watergate apartment of outgoing Secretary of State Condoleezza Rice. State Department officials stay the conversation will focus on policy and the day to day management of the State Department. Stay with us to talk about Hillary Clinton's rise like a political phoenix is Ron Brownstein, political director for Atlantic Media. You have a terrific column out about Hillary Clinton and the potential pit falls. You mentioned her star power could be one of them. Explain why.

RON BROWNSTEIN, ATLANTIC MEDIA: The star power is both an asset and a potential risk. The asset, of course, is now we are in a global war of ideas, as well as a military battle on several fronts. But a global war of ideas and her celebrity insures that really everywhere in the world, she will have access to a megasized megaphone. The down side could be this independent political base that she has at home and abroad encourages her to think of herself as an independent power center which is a dangerous illusion in the job of secretary of state. Ultimately it depends on maintaining a close connection with the president and staying on the same page.

SHUSTER: Is there a danger in your mind in the Obama perspective in terms of this huge stage overseas, that he somehow feels that is somehow threatening or undermining him.

BROWNSTEIN: One of the things that's striking about Obama is that he has been willing as president to bring in other big names, marquis names into the Cabinet. And it shows a great deal of self-confidence. Both that he can knit these people together. What is striking about many of the people he has chosen, including Hillary Clinton, he has not worked closely with them before and some of them, at least, have not worked closely with each other. And he is putting a lot of pressure on himself to be kind of the fulcrum here that brings all of this together. But I think he is confident he can maintain the direction here. But again, with someone who will attract media attention Hillary Clinton will, both at home and internationally, any small divergence between her and the White House is probably going to be magnified. So it's going to be a challenge for both of them.

SHUSTER: One of the key foreign policy challenges for Hillary Clinton will be solving the Israeli-Palestinian conflict. And yet as Senator Clinton, Hillary Clinton was often there with Jewish leaders, the Jewish community, taking a very strident, very strong pro Israel position. Could that harm her ability, either perception-wise or simply because she remembers who her constituents were? Could that hurt her in some ways?

BROWNSTEIN: It is going to be one of the challenges for Hillary Clinton. In the 19th century, it was common to name working politicians as secretary of state. John Calhoun, Daniel Webster, Henry Clay. Many of the great senators of the 19th century were moved into this job. It has become much more rare in the 20th century. Only two since World War II have been previously elected, two secretaries of state have previously held elected office. One of the assets you bring is an understanding of the domestic politics of foreign policy. The down side again would be if that becomes paralyzing. If you are so conscious of the risk of taking bold moves in foreign policy in terms of the domestic reaction that you don't take them. It is going to be very difficult I think for President Obama to play the mediating role that the U.S has to play in the Mideast unless his administration is willing to pressure Israel as well as the Palestinians and the Arabs towards concession for progress. Will Hillary Clinton's become more sensitive toward that? More reluctant to do it? We'll have to see. But there is that danger.

SHUSTER: And is there also a danger that if Hillary Clinton and Barack Obama are viewed as having a little bit of space between their views, that could harm is credibility of either one?

BROWNSTEIN: Absolutely. That's the great challenge here. I think when they can sit down and prepare, they're going to be very diligent about getting on the same page. But you don't always get to sit down and prepare. Sometimes like in a sporting game you have to react by your instincts. And the question will be whether Hillary Clinton's instincts and Barack Obama's instincts are going to be the same on the choices they face and the reaction she must make abroad. Colin Powell a couple times got on a different page than the White House and it hurt his credibility.

SHUSTER: Ron Brownstein, thank you very much. We appreciate it.That's the view from 1600 PENNSYLVANIA AVENUE. I'm David Shuster. Thanks for watching. We'll see you back here tomorrow night.

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

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