updated 12/11/2008 12:04:50 PM ET 2008-12-11T17:04:50

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

Guests: Lynn Sweet, Harold Ford Jr., Pat Buchanan, Craig Margolis, Jim Warren, Matt Cooper, John Harwood, Dan Froomkin

DAVID GREGORY, HOST: Tonight, political chaos in Illinois. The indicted governor refuses to budge. A cloud rises over a popular congressman. And damage control starts for the former senator who is the next occupant of 1600 PENNSYLVANIA AVENUE.

Forty-one days until the inauguration of President-elect Obama.

Welcome to the show, everyone. I'm David Shuster.

Tonight's headline, "Please Resign."

The pressure is ratcheting up on Illinois Governor Rod Blagojevich. He faces bribery and conspiracy charges after allegedly trying to sell Barack Obama's vacated Senate seat. Today, 24 hours after the criminal complaint was filed, a spokesman for the president-elect finally said Mr. Obama believes Blagojevich should leave office. "The president agrees that under the current circumstances it is difficult for the governor to effectively do his job and serve the people of Illinois."

Late this afternoon, Democrats in the Senate also urged Blagojevich to step down, noting his power as governor to fill Obama's vacancy. They warned him, "For the good of the Senate and our nation, we implore you, refrain from making an appointment to the Senate."

As of this hour, Blagojevich appears to be standing firm, and there are indications he plans on staying in office while fighting the charges in court.

Meanwhile, the political world has been consumed with speculation over Congressman Jesse Jackson Jr. NBC News has confirmed that Jackson is senator number 5 in the criminal complaint. That potential senator was alleged by Blagojevich to be willing to pay up to $500,000 for the seat.

This afternoon, Jackson strongly rejected the claim.

(BEGIN VIDEO CLIP)

REP. JESSE JACKSON JR. (D), ILLINOIS: I reject and denounce pay-to-play politics and have no involvement whatsoever in any wrongdoing. I did not initiate or authorize anyone at any time to promise anything to Governor Blagojevich on my behalf. I never sent a message or an emissary to the governor to make an offer, to plead my case, or to propose a deal about a U.S. Senate seat, period.

(END VIDEO CLIP)

SHUSTER: Jackson's lawyer also said today that the congressman is not a target of the investigation. Joining us now here in Washington is Lynn Sweet, Washington bureau chief for "The Chicago Sun-Times." Lynn, a lot to get through today. Let's start with Governor Blagojevich. What is your latest reporting as far as his effort to try and stay in office?

LYNN SWEET, WASHINGTON BUREAU CHIEF, "CHICAGO SUN-TIMES": The governor is not moving. The Illinois general assembly is moving ahead next week to try and strip him of his powers.

At issue is the general special elections to elect a replacement for Obama. It will cost Illinois taxpayers about $30 million.

So even though there is a big move, Obama called for it today, a special election today, Senator Durbin today and yesterday, and asking for Blagojevich to step down, talking about special elections. The lieutenant governor who would replace the governor wants a special election, but tow reality is setting in, David -- $30 million to do this.

SHUSTER: What is the possibility of impeachment proceeding to try to force him out?

SWEET: I think he's effectively not at the end of the line here. The issue, I think, really is, does he collect the paycheck and do any function as a governor or not? I think he will face some impeachment proceedings, which were warming up anyway even before this latest chapter, just for other stuff that had been out there. So I think the prospects are good that pretty soon, this will resolve itself one way or another. Though knowing Blagojevich as I do and I've covered him many, many years-I would not expect him to quit today, tomorrow, or the next day.

SHUSTER: Let's talk about Jesse Jackson Jr. Quite a press conference this afternoon. He acknowledged that he does want the Senate seat, he did want it, but he said that he thought his qualifications were under consideration, nothing else.

Watch.

(BEGIN VIDEO CLIP)

JACKSON: Clearly, I was badly mistaken. I did not know that the process had been corrupted. I did not know that credentials, that qualifications, that a record of service meant nothing to the governor. I did not know that the governor and his cronies were attempting to use the process to extort money and favors in a brazen pay-to-play scheme.

(END VIDEO CLIP)

SHUSTER: What do you make of Jesse Jackson Jr.?

SWEET: He was the most overt campaigner for the job in a election where there was one voter, Blagojevich. He had gone around the state looking for endorsements, drumming up support, organizing.

So what I make of this, I'm giving him the benefit of the doubt right now that, whatever Blagojevich said, that there might be an explanation. In Illinois, people are used to going up to the line. I've been saying this since yesterday, David. And by that is, when you want to help somebody and be politically supportive of them, the way you do it in Illinois is to help them fund-raise.

I would think that the denial that Jesse Jackson Jr. gave is about as strong as you could get. He also had a pretty good line in there. I don't know if you're going to use it, where he said, I just thought if a tall, skinny kid with a funny name could become president-elect, then a short guy with a well known but controversial name could maybe be a senator one day, too.

So I think that so many things that Blagojevich said just were out of the ballpark, like he actually thought he could get a place in the Obama cabinet. That-I just want to hear more and maybe find out more about those conversations, if we ever get a complete transcript.

SHUSTER: What took the Obama transition 24 hours, which in this sort of case can be an eternity, to finally come out and say, yes, the guy ought to leave office? What were they waiting for?

SWEET: Cautious, cautious, cautious. I think they had a lot of gut check to do just to make sure what the legal implications would be if Obama spoke out. I think it gave him a comfort factor in this one not to lead, but to follow.

On the other hand, David, we have corruption in Illinois that has gone on for decades. In this case, since President-elect Obama has talked so much about ethics in Illinois, I had thought yesterday he would have given a stronger statement than he did, where basically he said he had nothing to do with any of the things that Blagojevich said, which is what the U.S. attorney said.

SHUSTER: Lynn Sweet, bureau chief in Washington here for "The Chicago Sun-Times."

Lynn, interesting reporting. Thank you so much, as always. We appreciate it.

SWEET: Thank you.

SHUSTER: While neither President-elect Obama nor any member of his team has been implicated in the Blagojevich scandal, this could carry political implications.

Politico writes today, "For Obama and his team, the Blagojevich scandal is a stink bomb tossed at close range. Legal bills, off-message headlines, and a sustained attempt by Republicans to show that Obama is more a product of Illinois' malfeasance-prone political culture than he is letting on-all are likely if the Blagojevich case goes to trial or becomes an extended affair."

For more, let's bring in Pat Buchanan, former Reagan White House communications director and Nixon speechwriter, and an MSNBC political analyst; and Harold Ford Jr., chairman of the Democratic Leadership Council and an NBC News analyst.

I want to talk about the Obama team in a moment. But first, Harold, you served with Jesse Jackson Jr. What do you make of the governor's allegations about him?

HAROLD FORD JR., NBC NEWS ANALYST: I don't believe them. I believe Congressman Jackson-I know him as "Jesse." I believe his assertions today.

I don't think he could much stronger, more emphatic. And frankly, I thought-I know you shared earlier one of his better lines, is when he compared himself to Barack and thought that a person with a controversial name could become senator. I thought his best line was when he said he thought that qualifications and credentials alone would be the determining factor. So I take him at his word.

SHUSTER: I do want to sort of wonder whether Jesse Jackson Jr. has a lawyer problem, if nothing else.

And Pat, I'll set this one up for you. Here is the exchange from the lawyer's news conference with reporters today. Watch.

(BEGIN VIDEO CLIP)

QUESTION: Is he still interested in filling that seat?

JAMES MONTGOMERY, REP. JESSE JACKSON JR.'S ATTORNEY: Absolutely.

QUESTION: Will it be tainted?

MONTGOMERY: I would think that that would be a problem, that it might very well be tainted. Probably the better of all alternatives would be for the governor to step aside, resign, and allow the lieutenant governor to assume...

(END VIDEO CLIP)

SHUSTER: Now Pat, to put that in some context, the initial question was, would Jesse Jackson Jr. accept the seat if Governor Blagojevich now gave it to him? And the lawyer first said absolutely, and then he backtracked.

Is that a problem when your lawyer gives answers like that? I mean, shouldn't the lawyer have less of a tin ear than that?

PAT BUCHANAN, MSNBC POLITICAL ANALYST: I think the lawyer should have said absolutely not, it would be a tainted seat. But I think Jesse Jackson has a bit of a problem.

You notice that lawyer, what he did, David, was he said, we don't know if some fund-raiser was out freelancing on his own and making some offer. In other words, they cut loose, whoever it was, was in there or was talking to the governor or his chief of staff.

But Barack Obama has a serious problem here in this sense. Yesterday, he learned that his Senate seat that he had held for four years was being put up for sale by the governor of Illinois. And he said, "This is certainly a sad day." I mean, that is not a normal reaction, to be honest.

Secondly, while Barack Obama said, look, I have never talked-or I did not talk to the governor at all, he did not say his aides, Rahm or Axelrod, had not talked to the governor. He did not say whether he had had someone talk to the governor. He did not say whether someone reported to him. But somehow the governor got the message that his demands would not be met by the Obama team.

Who told the governor that they couldn't meet his demands? I mean, these are the questions the press ought to be asking Barack Obama to come out and explain, because everybody up there is going to be walking into a grand jury.

FORD: David, can I respond to Pat here just one moment?

SHUSTER: Go ahead, Harold. Yes.

FORD: I think two things here. Senator Obama supported Governor Blagojevich in his reelection run in '06, and obviously played a big role in 2002.

As someone who has served in political office, Democrat or Republican

I'm a Democrat-you support the top of your ticket. I don't think there was any sense that Governor Blagojevich was engaged in this kind of activity, certainly no criminal activity.

And if I would say to my friend Pat, you know as well as I do, Governor Blagojevich played no role in the presidential campaign of Obama. He was not there, to my knowledge, not there even when he announced in Springfield. He had no role at the Democratic convention, has played no role in his transition team.

So, as much as I appreciate I think where Pat-some would understand where Pat is trying to take this, I think the reality here is you have a governor who has been accused of perhaps the most awful thing a public official can be accused of as it relates to his job. Naturally murder and those things are worse, but violating the public trust. He now will have to answer to the public and answer a jury...

(CROSSTALK)

SHUSTER: Wait a second though. Here's what is feeding part of.

David Axelrod, to a local television station on Sunday, November 23rd, asked about, essentially, the Senate seat and Obama and the decision by Governor Blagojevich. He said, "I know he (Obama) talked to the governor. And there are a whole range of names, many of which have surfaced. And I think he has a fondness for a lot of them."

Well, then last night Axelrod put out this statement: "I was mistaken when I told an interview last month that the president-elect has spoken directly to Governor Blagojevich about the Senate vacancy. They did not then or at any time discuss the subject."

I mean, are we now at a point where we have to sort of parse what it mean when you talk about speaking directly?

BUCHANAN: Well, look, he clearly misspoke or he misstated or something.

But let me tell you, Harold, what is the problem. It is not that Rahm Emanuel or David Axelrod were involved in some deal for a Senate seat. It is that they may be tainted by the fact that they talked to a governor who is trolling and selling this Senate seat. They may have talked to him.

FORD: But Pat, that assumes that they knew that.

BUCHANAN: And if they did, they were supposed to report that. They were supposed to report that to the U.S. attorney.

Let me tell you, Harold, a lot of my friends in the Nixon White House didn't do a thing when some guy came running in and said our guys got caught breaking in. They just had constructive information and they didn't do anything with it.

FORD: But Pat, I think it's wildly and grossly unfair to make accusations about Rahm Emanuel, David Axelrod or anyone about these conversations.

BUCHANAN: I'm not making accusations. I'm saying they-I'm asking questions.

Did anybody in Barack Obama's camp talk to the governor? And did the governor make demands of him? And Barack Obama ought to come out and say, not only did I not talk to him, my people did not talk to him at all about that. None of them has heard any of this stuff.

FORD: But Pat, even prior to the vacancy being created by Senator Obama being elected president, there was no involvement of Rod Blagojevich in this campaign.

BUCHANAN: I'm not saying he's in the campaign.

FORD: There was no involvement of Rod Blagojevich-but my point-but Pat, there would have to be a string of involvement here. And there has not been that with Governor Blagojevich.

BUCHANAN: But no, Harold, let me tell you...

FORD: And it would not be unusual for the governor, who is making the selection of this now president-elect's former seat, to have some contact that wouldn't necessarily...

(CROSSTALK)

SHUSTER: Does there need to be more of a clarification of the president-elect?

BUCHANAN: Yes.

It is not credible, Harold, to say that these whole-Obama and his whole camp didn't give a hoot about who gets that Senate seat, when, apparently, they would have liked Ms. Jarrett to get it. I'm sure they got interest in it.

He wants a strong guy in there. He doesn't want some conservative Democrat who is going to give him problems. Of course they've got an interest in that.

FORD: There was one person arrested. His name is Rod Blagojevich. He is the person being held accountable and responsible for this. Jesse Jackson, Rahm Emanuel, David Axelrod, none of them have been implicated in any of this. I think it's only fair...

BUCHANAN: I'm not saying they have.

FORD: But Pat, to even mention their names-what Blagojevich has done is the worst thing, as you well know, and violating the public trust.

SHUSTER: We'll continue talking about this.

Pat, I agree with you. Pat, I agree that I think Obama needs to give a better clarification than he has, and that he blew it on the first day. But in any case, we'll wait and see what happens with Obama tomorrow at his news conference, where surely he's going to be asked about all of this again.

FORD: And he'll have to-David, he has to answer these questions.

SHUSTER: Harold Ford Jr., former congressman.

FORD: No doubt about it.

SHUSTER: He will have to answer, absolutely.

And Pat Buchanan, MSNBC analyst.

Thank you both. We appreciate it.

BUCHANAN: Thank you.

SHUSTER: Up next, not buying it. Congressman Jesse Jackson Jr. says he was absolutely not involved in the scandal surrounding the attempted sale of President-elect Obama's Senate seat. But why then did prosecutors put that suggestion in the charges against Governor Blagojevich?

We'll talk to a former prosecutor when 1600 returns.

(COMMERCIAL BREAK)

SHUSTER: Welcome back.

The criminal complaint against Illinois Governor Rod Blagojevich includes this intriguing reference to a politician now identified by law enforcement sources as Jesse Jackson Jr. "In a recorded conversation on October 31, 2008, Rod Blagojevich described an earlier approach by an associate of Senate Candidate Five as follows: 'We were approached pay to play. That, you know, he'd raise me 500 grand.'"

"'An emissary came. Then the other guy would raise a million if I made him (Senate Candidate Five) a senator.'" Today, Jesse Jackson Jr. flatly denied the governor's claim.

(BEGIN VIDEO CLIP)

JACKSON: I never sent a message or an emissary to the governor to make an offer, to plead my case, or to propose a deal about a U.S. Senate seat, period.

(END VIDEO CLIP)

SHUSTER: Joining me now is former federal prosecutor Craig Margolis.

And Craig, why would a prosecutor identify somebody as "Senator Number Five?" And what do you make of the clear contradiction between what was put in this criminal complaint based on Blagojevich and what Jesse Jackson Jr. said today?

CRAIG MARGOLIS, FMR. FEDERAL PROSECUTOR: Well, the-and thank you for having me.

The reason for identifying the person by a number is it's Department of Justice policy. In a charging instrument like this, the Department of Justice policy is not to name an individual unless that individual has otherwise been charged criminally. So it's really designed to protect the identity of people who are mentioned generically in a charging instrument.

SHUSTER: But clearly, that didn't work because law enforcement sources very quickly said, well, that is Jesse Jackson Jr. So why not just go ahead and have the prosecutor say, well, that's correct, but he is not a target of the investigation, he's not a subject, he's not being investigated, which would clearly signal that even the prosecutors don't believe Blagojevich?

MARGOLIS: Well, that's right. And frankly, if that is what happened, that is not what is supposed to happen in terms of actually identifying a person who is mentioned just generically in a charging instrument.

I mean, as we know, with the president-elect being identified in the affidavit, everybody knows who that is. And the office I think was very clear to state, there is no evidence or indication of any wrongdoing on behalf of the president-elect. With respect to-and I think in this instance, there may have still been at least some hope that, at least initially, they would safeguard the identity of the individual.

SHUSTER: Isn't it incumbent though-I mean, it doesn't-I mean, maybe we don't know whether Jesse Jackson Jr. has spoken with Patrick Fitzgerald yet. But if there's any question about whether Blagojevich is being truthful about Jesse Jackson Jr., shouldn't the prosecutors talk to him and work that out and evaluate Jesse Jackson Jr. before they make a reference like that in a criminal complaint?

MARGOLIS: Well, that's not typically how it would work. I mean, you would often find even victims of potential schemes being identified just by a number.

That really is Department of Justice policy and practice. It was certainly my experience when I was a prosecutor.

And what's particularly important in this instance is, just by virtue of the fact that somebody is named in an affidavit and may even appear in a reference, in a wiretap, doesn't necessarily mean that the government has any evidence or indication that that person that is mentioned in a wiretap has done anything wrong.

SHUSTER: Could we read into this, though, that perhaps prosecutor Fitzgerald's hand was forced? He had to speed things up. We know that there was a grand jury looking at this, but perhaps Fitzgerald felt because of this crime spree he needed to file the criminal complaint to stop it, even though perhaps as early as tomorrow, a grand jury might have indicted Blagojevich on the same charges?

MARGOLIS: Well, I mean, the use (ph) of a criminal complaint typically, as you've mentioned, is for an emergency situation. But there is also another person for it.

Another purpose is to provide what we call a sort of speaking indictment or speaking charging instrument. An affidavit in support of a criminal complaint provides a lot of detail you ordinarily wouldn't see in an indictment, and essentially a way for the Department of Justice to tell a story publicly that they, because of grand jury secrecy rules, can't discuss publicly as to what happened before the grand jury. And an indictment is generally a much shorter document that's much more sparse on detail.

SHUSTER: Craig Margolis, former federal prosecutor, also now a white collar defense attorney. Craig, thank you very much. We appreciate it.

MARGOLIS: Thank you for having me.

SHUSTER: Coming up, from a Clinton primary suite (ph) to President-elect McCain to recession? What recession? The banks are completely stable.

We're looking at the worst predictions of 2008 when 1600 returns.

(COMMERCIAL BREAK)

SHUSTER: We are back with a look at what's going on "Inside the Briefing Room."

And since briefing rooms are often a place where you can find public analysis and predictions, we've decided to take this opportunity today, as we near the end of this year, to declare the five worst predictions about 2008. Special thanks to foreignpolicy.com for some help.

Number 5: Fox News Sunday pundit Bill Kristol. "If Hillary Clinton gets a race against John Edwards and Barack Obama, she's going to be the nominee. Gore is the only threat to her, then. Barack Obama is not going to beat Hillary Clinton in a single Democratic primary. I'll predict that right now."

Well, after Barack Obama won Iowa, Kristol reversed course in a big way, predicting Clinton would lose New Hampshire. He got that wrong, too. Kristol also wrote a column titled "President Mike Huckabee." And Kristol's a columnist with "The New York Times." It's "bleeping" amazing. Our number 4 worst prediction of the year: Donald Luskin, an economist and an informal adviser to John McCain, "Anyone who says we're in a recession, or heading into one-especially the worst one since the Great Depression-is making up his own private definition of 'recession.'" The day after Luskin's op-ed, Lehman Brothers filed for bankruptcy.

And the rest is history.

Number 3: At the start of the year, "BusinessWeek" boldly reported, "New York Mayor Michael Bloomberg will enter the presidential race in February, after it becomes clear which nominees will get the nod from the major parties. He and Clinton will split more than 50 percent of the votes, but Arizona's maverick senator, John McCain, will end up the country's next president."

Wrong, wrong, and wrong.

Number 2: on May 5th, Arjun Murti, a Goldman Sachs oil analyst, declared, "The possibility of $150 to $200 per barrel seems increasingly likely over the next 6 to 24 months."

That wasn't exactly going out on a limb at the time. After all, oil prices were above $100 and edging higher. However, Mr. Murti is considered so smart that "The New York Times" describes him as the "Oracle of Oil."

Well, other less well-known analysts, however, predicted that high prices in a global recession would cut into demand, causing prices to drop. They were right. The oracle was wrong.

Oil peaked this summer at $147 a barrel and never crossed the $150 threshold. Now prices are nearing the $40 mark.

And the number one worst prediction of 2008: Treasury Secretary Hank Paulson, after getting from Congress what he called his bazooka, a $700 billion mandate to scoop off bad assets from troubled banks, Paulson made this confident prediction on National Public Radio.

(BEGIN AUDIO CLIP)

HENRY PAULSON, TREASURY SECRETARY: I believe the banking system has been stabilized. No one is asking themselves anymore, is there some major institution that might fail and that we would not be able to do anything about it?

(END AUDIO CLIP)

SHUSTER: Most people consider Citigroup to be a major institution. The next week, their stock price plunged 75 percent requiring another government fix. And over the next month, the markets continued to plunge. Furthermore, the lingering problems with the credit crisis now threaten other institutions including, for example, the U.S. auto industry.

The post bailout prediction by Paulson that the system has been stabilized-the worst prediction of 2008.

Up next: Scooter Libby, Karl Rove and Rod Blagojevich-just some of the political stars who have found themselves in the sights of prosecutor Patrick Fitzgerald. What else is on his resume? And what is in his future.

When "1600" returns.

(COMMERCIAL BREAK)

SHUSTER: Tonight, changing the subject. President-elect Obama announces another news conference tomorrow. The roll-out of high-profile cabinet pick Tom Daschle as the scandal surrounding Illinois governor Rob Blagojevich gets messier now with Jesse Jackson, Jr. a top contender to replace Obama when the president-elect moves to "1600 PENNSYLVANIA AVENUE."

Welcome back to "1600 PENNSYLVANIA AVENUE." I'm David Shuster.

At a news conference late this afternoon, Congressman Jesse Jackson Jr. referred to as Candidate # 5, Senator # 5, in the Blagojevich federal criminal complaint, expressed outrage about any implication that he may have been involved in the Blagojevich pay for play scandal.

(BEGIN VIDEO CLIP)

REP. JESSE JACKSON, JR. (D) ILLINOIS: I was shocked and saddened to learn that Illinois Governor Rod Blagojevich was arrested yesterday by federal law enforcement officials. The details of corruption charges were staggering and stunning.

(END VIDEO CLIP)

SHUSTER: While Jackson denied being part of the scheme, he did offer his qualifications for the senate seat, nonetheless.

(BEGIN VIDEO CLIP)

JACKSON: I thought mistakenly that the governor was considering me based on my 13 years of hard work on behalf of the people of our state, as well as our nation. I thought mistakenly, I had a chance and I was being considered because I had earned it. Clearly, I was badly mistaken.

(END VIDEO CLIP)

SHUSTER: Joining us now with the latest on the Blagojevich investigation, is the Chicago, -- the former "Chicago Tribune's" Jim Warren who's now an MSNBC analyst.

Jim, first of all, the reaction in Chicago tonight through the Jesse Jackson Jr. news conference and also how are people reacting to Blagojevich seemingly to dig in his heels?

JIM WARRANT, MSNBC ANALYST: First of all, it is a little bit early, David, as far as the Jesse Jr. press conference. Middle of the afternoon, most folks are at work and I think they'll be reading about it tomorrow, listening to it tonight.

There is so much that we just don't know about what happened here. Obviously, the congressman did what was in some ways expected. Come out very defiantly saying, wait second, I had nothing to do with what was insinuated here. He did disclose there was something like an hour, hour and a half conversation between him and Blagojevich on Monday. For his sake, one sure hopes that that wasn't taped because if it was, then we'll have to see what was on that.

Clearly for Patrick Fitzgerald, the U.S. attorney, if we looked at that complaint yesterday, there was somebody trying to do some influence peddling, obviously, on behalf of that person # 5, talking about ponying up $500,000 himself. And then the person on whom, on whose behalf, on whose interests he was speaking would somehow come up with $1 million. For the Congressman, even if this is not true, boy, it is going to be tough to see him winning a battle of public opinion in the short term.

This stuff is playing out very, very fast, David. You've got folks wanting to hold a special session of the Illinois legislature on Monday to somehow try to beat Rod Blagojevich to the punch. And Blagojevich, remember, he still has the power to name Obama's successor. He still is innocent until proven guilty.

So a question to me is will the governor throw a big middle finger at everybody by selecting somebody? And there is no doubt that Congressman Jackson was probably one of five or six or seven or eight very able candidates. He has not, as he made quite clear today, has not been any bosom buddy of the governor. Claimed they had not spoken in years. So to that extent, he is in the line with President-elect Obama as not being members of the Rod Blagojevich fan club.

SHUSTER: Well, Jim, answer the question you just asked yourself. You've been covering Blagojevich for many years back to when he was a member of the U.S. House. Do you think he would essentially give the finger to the Democrats who are saying don't you dare name that senator?

WARREN: Well, if I have assurance from you that the polls have closed on your worst predictions of 2008, do I have that and you'll destroy the tape?

SHUSTER: You do. You have a guarantee.

WARREN: Everything that is played out in the last 48 hours, regarding the governor of Illinois, particularly the context in which he made those statements in the last week when he knew he was apparently being taped suggest that predicting in any way what he might do is close to impossible. I would throw a buck down that despite the growing public opinion against him making this choice, that he might just call a press conference, remind folks he is the governor of Illinois, and come up with a very good choice. And there is no shortage of good choices.

I personally think Congressman Jackson would make a pretty good senator. But in the context right now, it's going to be very, very difficult to select him, I think. Though I could see how the governor would do it.

The governor would come out and say, I'm picking a terrific African-American public servant. He would allude to the legacy of the Jackson family and fighting for various causes. It would be instantly seen very favorably and an important political constituency for Rod Blagojevich if he had any political future left, namely the significant Illinois, Chicago, specifically, African-American community. I could see how he might just do it.

Right now, my bet would be on him selecting somebody, not necessarily Congressman Jackson.

SHUSTER: MSNBC political contributor, Jim Warren.

Jim, I think we're going to ask you to stick around to talk about where we're going to take this conversation next because the prosecutor back to the national spotlight in the Blagojevich case is none other than U.S. attorney Patrick Fitzgerald. He is considered one of the best courtroom prosecutors in the justice department; somebody who has a flair for convincing narratives and compelling phrases in front of juries and the press.

You will recall that Fitzgerald led the investigation into the White House leak of CIA agent Valerie Wilson. And this was how Fitzgerald once described the role of Vice President Cheney's chief of staff, Scooter Libby, who appeared to be trying to protect others, including the vice president from legal harm over the leak.

(BEGIN VIDEO CLIP)

PATRICK FITZGERALD, U.S. ATTORNEY: What we have when someone charges obstruction of justice, the umpire gets sand thrown in his eyes. He is trying to figure out what happened and somebody blocked their view. As you sit here now, if you're asking me what his motives were, I can't tell you.

(END VIDEO CLIP)

SHUSTER: In the closing argument to the Libby case, prosecutor Fitzgerald said Libby had brought a cloud over the vice president's office and over to White House.

Now here is what Fitzgerald said yesterday putting the actions of Illinois governor Blagojevich in context legally and historically.

(BEGIN VIDEO CLIP)

FITZGERALD: The most cynical behavior in all this, the most appalling, is the fact that Governor Blagojevich tried to sell the appointment to the senate seat vacated by President-elect Obama. The conduct would make Lincoln roll over in his grave.

(END VIDEO CLIP)

SHUSTER: Joining us now to talk more about who Patrick Fitzgerald is, somebody that a lot of us have covered and others have had a different kind of relationship, Matt Cooper-portfolio.com. When he worked for "Time" magazine, Matt was held in contempt of court and threatened with imprisonment by Fitzgerald for refusing to testify before his grand jury in the Valerie Plame leak investigation. He eventually agreed to testify.

You had a very different relationship, Matt, covering with Fitzgerald than those of us who are watching him day in and day out in court. What was he like to deal with?

MATT COOPER, PORTFOLIO.COM: Well, I saw two sides of Fitzgerald, David. One, when I was in contempt and I had him on my back; let's just say that's not a place where you want to be. And then I saw a different side of him when after my source released from confidence, I went ahead and became a government witness. Then I had a couple of meetings with Fitzgerald.

Look, I think we all know he is very focused. I don't think he is a vengeful guy. He had a lot of chances to put me in prison after I lost various court battles along the way. He waited for me to go all way through the appeals process to the Supreme Court. A vengeful prosecutor wouldn't have done that. So I think while he is a determined, serious guy, does his own homework. When I met with him, he knew my notes better than I did. I don't think he's a vengeful guy.

SHUSTER: Speaking of determined, I'll never forget from the Libby trial there was a hearing that was coming up. And Fitzgerald had been in Chicago with some of the staff and there was bad weather. He decided that with all the planes being delayed, the only way to get to Washington was to drive so he and his staff piled into a car and they drove 12 hours through the night to get to Washington D.C. in time for the 9:00 hearing. This is a guy who doesn't give up very easily.

COOPER: No, absolutely not. He really runs the case. When I met with him, normally you meet with a prosecutor, I'm told. This is not something do I everyday but there's a felon today, another deputy prosecutor is who you're dealing with. He would come alone just with the FBI for a record and really have all the note in his briefcase. And he has got it all up in his head.

SHUSTER: Jim Warren, the reputation of Fitzgerald in Chicago, he may be even better known to all of you in the Windy City than those of us here in D.C. because of the number of news conferences, the number times where when he announces an indictment, he comes out and talks to the press even if that's the last time you hear from him until the case is over.

WARREN: Yes. I agree. And Matt is correct in calling him focused; some would say obsessive. And for those out there who cast aspersions on public servants and government, you have to look at a guy like this as a true solid public servant who heads up a very impressive record. And one of the reasons that so much corruption has come to light in the state of Illinois in the last 20, 30 years, is because of a streak, a very, very impressive U.S. attorney.

He's got an infrastructure in that office of sort of the best of American civil servants. That said, the whole Elliott Ness caricature, the mythologizing of him, of Fitzgerald as the guy who walks on water. One has to live on that.

This guy is mortal. He is human. There are some lesser known prosecutions which have not fared quite as well here in Chicago. One in particular, a terrorist case which basically disassembled and they got a very, very, very minor ultimate plea in a very high profile post-9/11 alleged terrorism case. So there have been a couple of examples where I might argue that the prosecutorial frenzy and passion of Fitzgerald has gone a little bit overboard.

But that said, boy, look at the track record. This is a guy who sort of hits about 850. If he was a free agent in the majors, Lord knows where the bidding would start.

SHUSTER: Well, given that track record and given your own experience, you wrote a letter, tongue in cheek, to Governor Blagojevich. What was your advice to Governor Blagojevich in dealing with Fitzgerald?

COOPER: My advice to Governor Blagojevich was as I said earlier, Fitzgerald is a reasonable guy. And I think if you're not going to take this to trial and you aren't going to plead, do it now.

First of all, Obama's going to keep him in the job as long as he wants to be in the job. But if for some reason, Fitzgerald wants out after a long service, whoever Obama puts in there is really going to want to make sure that they're seen as being tough on Blagojevich. There is no good break for him coming down the road. He might as well do something now.

Governor Ryan, the first governor that Pat Fitzgerald managed to put in jail was able to get six and a half years; that means he can be in a minimum security facility which is a big difference in your quality of life than something higher up the food chain. And Blagojevich would be wise to just deal now and he would be wise not to thumb his nose by appointing a senator, appointing Pat Fitzgerald to senator, not engage in any pyrotechnics.

SHUSTER: That's a fascinating one; Patrick Fitzgerald as U.S. Senator from Illinois.

COOPER: Well, if you're going to stick it; if Blagojevich is as unhinged as he seems from these indictments then why not just make Fitzgerald the senator?

SHUSTER: Matt Cooper and Jim Warren, thank you both. Go ahead, Jim.

Last word, you get it.

WARREN: Pleasure. All I can say, Matt, you may be a victim of inordinate rationality in assessing what the governor should do. Look at the transcripts of those tapes again and don't necessarily bet on him copping a plea right now.

SHUSTER: Jim Warren and Matt Cooper, thank you both so much.

Up next, the fate of Detroit; Democrats and the White House say they've reached an agreement on an auto bailout but some Congressional Republicans are mounting a campaign to kill the bill.

How do taxpayers feel about where their money is going? The new NBC News/"Wall Street Journal" poll numbers when "1600" returns, right after this.

(COMMERCIAL BREAK)

SHUSTER: Up next, the proposed auto bailout deal made one lawmaker bleeping mad on the Senate floor today. Will Republican opponents be able to kill the bill? We'll talk about that when "1600" returns.

(COMMERCIAL BREAK)

SHUSTER: Welcome back.

And right now, the fight over the auto bailout. We want to show you some live pictures of the house floor where emotions are running high as lawmakers continue to debate the proposed $15 billion bailout. The White House is doing a full court press to get Congressional Republicans on board trying to assure them the rescue package is not throwing taxpayers' money at a doomed industry.

(BEGIN VIDEO CLIP)

JOEL KAPLAN, CHIEF WHITE HOUSE NEGOTIATOR ON BAILOUT: We wanted to make sure that it was tough. And that this was not a bridge financing to nowhere. That we could look these members in the eye and we could look the American people in the eye and say that this measure gives these companies a chance. And their stakeholders a chance but it is not a life line to continue with bad management and a bad business plan.

(END VIDEO CLIP)

SHUSTER: But some Republican lawmakers are not happy with the agreement brokered by the White House and Congressional Democrats. And today Senator David Vitter, Republican from Louisiana, expressed his opposition to the proposed legislation in explicit terms on the senate floor.

(BEGIN VIDEO CLIP)

SEN. DAVID VITTER, ® LOUISIANA: I think the average American would say, what? Isn't that putting the cart before the horse? Isn't that to use a common phrase, just ass backwards? $15 billion and then, later, after that's out the door, we'll see a detailed restructuring plan?

(END VIDEO CLIP)

SHUSTER: John Harwood, CNBC's chief Washington correspondent and political writer for the "New York Times." I'm so tempted to ask about Vitter's profanity but let's not.

Where is the bailout headed?

JOHN HARWOOD, CNBC CHIEF WASHINGTON CORRESPONDENT: I think it's likely to pass the House, David. It's an open question in the Senate. There is a significant amount of resistance from the Republicans. It looks as if they're going to try to get cloture; Harry Reid's filed for cloture. They're going to try to have either an agreement tomorrow or a vote on Friday to try to break a filibuster to see if they can get it done over the weekend and Monday.

I suspect in the end it's going to be, David, like the bailout vote in Congress in September when you had the "Perils of Polly" and right up to the end, it went down once and then it finally got through. I suspect it will happen but we don't know yet.

SHUSTER: The Democrats need ten Republican Senators to go along too in order to invoke cloture and break the filibuster. Do they think they're close to that?

HARWOOD: I think they believe they'll get it at the end. There is a sticking point right now about environmental policy. The house bill does not make clear that the auto company can ignore state fuel emissions standards. There is a standard in California that the auto companies are locked up against right now. The senate wants them to lose that standard. I think the house will lose it in the end.

Right now, they're in the process of course of getting a house vote tonight. We expect that around 8:00. Most Republicans are going to be opposed but we believe there will be enough Democrats and a few Republicans who're going to vote to pass this.

SHUSTER: The new NBC News/"Wall Street Journal" poll on the auto bailout asked whether people approve or disapprove; 46 percent approve, 42 percent disapprove. What do you make of that number?

HARWOOD: Well, actually a little bit better for the auto companies than people have expected. There is so much anxiety among members about voting for bailouts. People feel they were burned by the vote in September. And so many members went in warily to this vote, Democrats as well as Republicans.

But this suggests the public is split. You have this plurality saying go ahead and help them. And the backdrop of course is 1.9 million Americans have lost jobs this year; 533,000 last month. And you've got so many economists on the left and right saying hundreds of thousands jobs may be lost if these companies go down or one of them like General Motors goes down this month.

SHUSTER: John Harwood. John, thanks for coming on.

HARWOOD: You bet.

SHUSTER: Up next, how Vice President Cheney and his boss are trying to put their stamp on the Obama administration.

(COMMERCIAL BREAK)

SHUSTER: As the lame duck Bush administration winds to a close, there have been a flurry of executive orders and final regulations that have been issued in recent weeks and keeping track of all that is Dan Froomkin. He's the washingtonpost.com White House watch columnist joins us now.

Explain what they're doing. What is the most egregious stuff?

DAN FROOMKIN, WASHINGTONPOST.COM: In general, the Bush administration has really taken the high road when it comes to helping the Obama team with the transition and so on. But the low road is getting increasingly full of these last-minute regulations and executive orders and so on.

They have just, it is almost impossible to keep track. There's literally dozens of them. The post recently estimated that there's 61 last-minute rules that were discussed just in the last month.

Some of the highlights are a recent executive order that denies collective bargaining to several thousand federal employees. There was-probably the single biggest most controversial rule is the one that would essentially gut the Endangered Species Act by eliminating a requirement that federal agencies get an independent review of whether certain federal projects will affect one of the species.

And also explicitly, this is sort of the classic Cheney move. It also explicitly allows them to not take into account global warming. So that's another great one. There are rules that would allow commercial development of something like two million acres of federal land in the west for oil shale. And one of my favorites is a rule that would allow loaded weapons in national parks.

SHUSTER: That changes a long standing rule. Who is the Bush administration other than the NRA, is this something the NRA wanted? I don't remember anybody saying, I really need to take my concealed weapon into Rocky Mountain National Park.

FROOMKIN: You know, that one is actually a little bit of an outlier because almost all of the rest of the ones, you can really pretty much trace to the fact that there are favors to key industries that have had close associations with the White House and with the vice president in particular.

So if you think about this, a lot of this is sort of what Cheney is up. And you think about loaded guns, national parks; it makes a certain amount of sense.

SHUSTER: How difficult will it be for the incoming administration to reverse or change some of this?

FROOMKIN: Surprisingly difficult. I'm not enough of a policy one to be able to explain this to you in complete detail but a rule that is finalized in enough time to have been in effect for 30 or 60 days, to be in effect by the time that Obama takes over the presidency, is very hard to repeal. It's a long, long complicated process.

Executive orders are a lot easier but even those require, you know you want to just dash off an executive order either. You need to take some time to study it to figure out how to do it.

SHUSTER: In other words, what they've been doing is essentially considering some of these rules for a while and now all of a sudden, you're at the end, actually acting on them. The time you back it up and they've been considering it for a while but here at the end, there is this flurry.

FROOMKIN: Arguably, they were afraid of the negative back lash if they've done this before the election.

SHUSTER: Dan Froomkin, he's the Washingtonpost.com White House watch columnist. We look forward to seeing you again because there's a lot else to talk about in terms of the Bush administration and what they're up to before they leave office. We'll have you back.

That's the view from "1600 PENNSYLVANIA AVENUE" tonight. Thank you for watching. We'll see you back here tomorrow night; same time, 6:00 p.m. Eastern on MSNBC.

I'm David Shuster. Good night.

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

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