updated 12/11/2008 12:09:10 PM ET 2008-12-11T17:09:10

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

Guests: Chuck Todd, Richard Wolffe, Chris Hayes, Margaret Carlson, Alan Havey

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

For the comically-corrupt governor of Illinois, out on bail and back to the office. There are still job placement money-making opportunities to be had.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Give us a hand here.

UNIDENTIFIED MALE: All right, sir.

UNIDENTIFIED MALE: Work, work, work. Work, work, work. Work, work, work.

(END VIDEO CLIP)

OLBERMANN: The leaks are out about who was candidate number five in the federal indictment, the one Governor Blagojevich insists it was willing to pay to get the Senate spot. Congressman Jesse Jackson, Jr., though there is no evidence, he knew that was Blagojevich's scheme and he denies it.

(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 met with Governor Blagojevich for the first time in four years on Tuesday.

(END VIDEO CLIP)

OLBERMANN: You mean Monday, right? Monday, not Tuesday.

But president-elect calls on Blagojevich to resign as Obama's approval rating hits two-thirds. Will Republicans really get anywhere trying to pin any of this on him?

Auto bailout deal: Done. Maybe. Bush satisfied. Democrats OK with it. Some Republican senators still making threats because the industry gets the money and then has to present its new business plan.

(BEGIN VIDEO CLIP)

SEN. DAVID VITTER, ® LOUISIANA: What? Isn't that putting the cart before the horse? Isn't that, to use a common phrase, ass-backwards?

(END VIDEO CLIP)

OLBERMANN: Senator Vitter, don't you think that's unfortunate wording for a man who was caught up in a prostitution scandal?

The other open Senate seat, the one that does not come with initiation fee, Caroline Kennedy versus Fran Drescher.

Worsts: The cover-up at FOX noise. The joke was about marijuana, the bleep covers up the name of a prominent fixed news figure.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: FOX News has the best weed in the world. I was really surprised.

(LAUGHTER)

UNIDENTIFIED MALE: (BLEEP) not like it when you get into his personal stash, sir. Call security.

(END VIDEO CLIP)

OLBERMANN: Who was it?

And the joy of Blagojevich: How one crazy governor has wound up subsidizing a million comedians.

All that and more: Now on COUNTDOWN.

(BEGIN AUDIO CLIP)

UNIDENTIFIED MALE: I didn't get a harumph out of that guy.

(END AUDIO CLIP)

(on camera): Good evening. This is Wednesday, December 10th, 40 days until the inauguration of President-elect Barack Obama.

"Power tends to corrupt, and absolute power corrupts absolutely," wrote Britain's Lord Acton in 1887. To complete his thought tonight, and absolute power tends to corrupt the ability to perceive reality in the absolutely powerful.

Our fifth story on the COUNTDOWN: The day after the most startling financial charge in politics since Spiro Agnew was accused of accepting cash bribes in the White House hours after he had to make bail just to go home, Illinois Governor Rod Blagojevich not only went back to work today, but when reporters barraged him with questions, he waved towards them, as if they were just wishing him "Happy Birthday." Just another day in Chicago politics.

The call for the governor to resign on his 52nd birthday today is coming fast and furious. Among them from the politician now confirmed to have been "Senate Candidate five," Congressman Jesse Jackson, Jr. Even Jackson's own lawyer all but admitting today that Jackson was "Senate Candidate Five."

In the indictment filed yesterday, the governor claiming that an associate of candidate five had approached him about a pay-for-play deal for the open Senate seat. That is a claim that Congressman Jackson and his lawyer categorically denied.

(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)

OLBERMANN: Jackson adding that he met with Blagojevich on Monday-well, he also said Tuesday-but the meeting was actually on Monday, for the first time in four years with the intention of discussing the Senate seat. A discussion, he says, all he had to offer.

As we mentioned, Congressman Jackson not alone in saying that Governor Blagojevich should step down through his press secretary, the president-elect is saying just that today, arguing, quote, "Under this current circumstances, it is difficult for the governor to effectively do his job."

Several state legislators in Illinois saying that that might force Mr. Blagojevich out through impeachment. The attorney general of the state, though, looking into having the Illinois Supreme Court declare him unfit to serve. And so long as Governor Blagojevich keeps showing up for work as he did today, Senate Democrats in Washington hoping to keep him from filling Obama's open Senate seat. All 50 members of the Democratic caucus signing a letter circulated by Majority Leader Reid's office, asking in part that the governor, quote, "under no circumstance make an appointment to fill the vacant Illinois Senate seat." And good luck with that.

Meanwhile, a brand-new NBC News/"Wall Street Journal" poll out tonight with some fascinating numbers about the Obama transition. Two out of every three voters surveyed, including many of those who did not vote for him pleased with the appointments that the president-elect has made to his administration. Another two out of three viewing him positively and 77 percent believing that the challenges he'll be facing as president will be bigger than those which most recent presidents have faced especially in the economy. Ninety percent-and what polls at 90 percent of the opinion that it has gotten far worst in the last year.

And as for the current president, with an economy like that, the majority opinion, 79 percent, that he won't be missed.

Let's turn now to MSNBC and NBC News political director, Chuck Todd.

Hi, Chuck.

CHUCK TODD, MSNBC POLITICAL DIRECTOR: Good evening, Keith.

OLBERMANN: First the governor, to invert my friend, Dan's phrase.

TODD: Right.

OLBERMANN: You can't hope just to contain him, you have to stop him.

How do they do it?

TODD: Well, they're trying everything. You mentioned the attorney general, (INAUDIBLE). The Supreme Court idea where you declare him unfit, it's only a temporary declaration. It could push him aside until he proves to the court that he's somehow fit. In the meantime, the lieutenant governor there, Patrick Quinn, would be temporary governor.

I mean, the problem you have is it will take months to the impeachment process to get him out of there and he does not-he believes in leverage, obviously.

OLBERMANN: Yes.

TODD: We learned that in the indictment. Well, right now his number one leverage, staying in office. So, he's going to stay in office until he thinks he can get some sort of deal that maybe keeps him out of prison or gives him some sort of break with the case.

OLBERMANN: So, we assume he's not been offered any kind of "if you get out we will lighten up on you" as Agnew got, say, when he was vice president?

TODD: It's hard to imagine anything has happened in the last 24 hours, just sort of the way-how quickly everything moved. You're not hearing any of that talk just yet. I think-I assume we will. It almost has to be that way but, again, this is not somebody who seems to be operating on full cylinder there.

OLBERMANN: Yes. With-on the same plane of existence as the rest of us, I think.

TODD: And that is the fear among a bunch of Democrats in Illinois.

OLBERMANN: Yes.

TODD: . among the Obama folks. They don't know what this guy is going to do next. They know that, logically, you would resign in this situation, but logic may not be the factor we look at first.

OLBERMANN: So, where does this put the Senate seat and filling it? Is there-I mean, if the lieutenant governor, if Mr. Quinn did take over, even on an interim basis, would he make an appointment and would it stick?

TODD: It think it's very likely if Quinn, if the lieutenant governor became the governor, that's what would happen. It's interesting. Dick Durbin, number two in the United States Senate, Illinois senior senator, and Harry Reid, the number one Democrat in the Senate, have two different views on what they'd like to see out of Illinois. Harry Reid would like to see it be an appointment.

OLBERMANN: Right.

TODD: Dick Durbin would like the special election idea. You talk to some Democrats in Illinois, they don't want a special election because they think, in this environment, they couldn't win. So this, you know.

OLBERMANN: Yes.

TODD: . playing pure politics here and keeping that seat Democrat, Harry Reid, is like, do the appointment, let it breathe for a year and a half and then you have a better shot in November 2010.

OLBERMANN: Yes, you might have a corruption blowback there, just possibly.

TODD: Right.

OLBERMANN: Switching briefly to the new poll you put out tonight.

TODD: Yes.

OLBERMANN: The big picture here, the headline for the president-elect is.

TODD: Two words: hope and despair. And the two in combination are giving Obama the potential to have a lot of leeway, a lot more than normal presidents do, his positive ratings through the roof. That's much higher than Bill Clinton had coming into office or George W. Bush had coming into office.

The despair. You pointed out those numbers, 90 percent. It's all over the place. So, you have people who didn't support him, rooting for him because they're rooting for the economy to get better, they're rooting for their own lives to get better. This could mean that instead of the normal 100 days or even 180 days, he will have more time. And that's what he needs to get because as you talk to any economist and they'll say, "Well, those things are going to get worse before they get better." We've heard Obama say this phrase.

The country appears to see-understand the scope of the problems, and in an odd way, that might actually be politically helpful for President-elect Obama.

OLBERMANN: Well, let me close it out back in Illinois. Is Jesse Jackson out of contention because of what happened or is his story going to stick?

TODD: It looks-he's out of contention. I mean, it was already tough for a lot of Illinois Democrats who didn't know how a person named Jesse Jackson was going to win over voters down state, which is a much different place than Chicago. Now, you do it with the-even the hint of some connection to Blagojevich-he's going to be a congressman for a long time. Maybe he'll run for mayor someday. I don't think he'll be a United States senator.

OLBERMANN: MSNBC and NBC News political director, Chuck Todd, always a pleasure to see you in the flesh, sir.

TODD: Thank you, Keith.

OLBERMANN: For more on what the Blagojevich scandal means for the Obama administration, time to bring in our own Richard Wolffe, also, of course, senior White House correspondent at "Newsweek" magazine.

Richard, good evening.

RICHARD WOLFFE, MSNBC POLITICAL ANALYST: Good evening, Keith.

OLBERMANN: Was it inevitable that the president-elect would have to weigh in today to call upon the governor to go? I mean, he seems to have a 24-hour grace period on almost anything and he seemed to use it but it ran out today, didn't it?

WOLFFE: It did and not just on this issue. He's been sitting on the sidelines just about everything until now and you just cannot-what are they thinking? You cannot sit out a story this big about your own Senate seat in your own state. And worse than that, his comments yesterday were so vague and general that you could easily misconstrue them as not being credible when he said he wasn't aware of what was going on.

Well, he may have been talking about this allegedly criminal behavior, or was he talking about the mess, the demands, the kind of behavior that Blagojevich was telling lots of people about, anyone who approached him with any concern about this seat. So, you've got a president-elect here who needs to move into the spotlight more confidently, because in spite of what he says, there is more than one president right at this time.

OLBERMANN: And in that absence, in that vacuum, it's as if the-those who wanted to tar Obama with this seized upon the David Axelrod remarks from a couple weeks ago that he had-Obama had spoken to Blagojevich about the Senate seat which Axelrod now says was a mistake. They seized that and they run with this as proof of something.

Where do the Republicans expect they're actually going to go on this or is this just something to soften Obama up for later?

WOLFFE: Oh, yes, this is about laying down the narrative so that if there is any taint, any wisp of corruption story, the foundation has been laid here. And, of course, this started much earlier with the campaign and it wasn't successful then, but this is a much different level of story.

What the Obama team needs to do and, unfortunately, Axelrod has contributed to this, but what they need to do is come up with a credible account of the kinds of activity they had in relation to the Senate seat. Because, clearly, they had opinions, whether or not they were fully engaged or engaged at arm's length, there's something they're going to have to explain not because of any allegation of wrongdoing or criminal behavior but to put their own narrative out there. You cannot constantly be in reactive mode on this kind of story.

OLBERMANN: Of course, they can simply quote Blagojevich from wiretaps calling him an MF-er. The president an MF-er, that's a pretty good defense, too.

WOLFFE: Right.

OLBERMANN: They just can get that one out. And-I mean, this is going to come up in this news conference tomorrow. He's going to be asked about this. Can Obama answer? Has Patrick Fitzgerald asked him not to comment? And if he has not asked him, should not the president-elect comment and comment extensively tomorrow?

WOLFFE: Well, as far as we know, there is no effort by Fitzgerald's office to say, don't comment. Remember that those requests went out to the White House because the White House itself was under investigation on a conspiracy question. So, there is no sense that the president-elect's office is in the crosshairs right now.

There's no real issue about prejudicing a jury. He can comment as much as he likes because there is no cloud of suspicion. Still, he needs to come up with his own full account.

OLBERMANN: Last point here-instead of getting the grand jury to indict Blagojevich, which is the route he took when he was looking into Scooter Libby and Plame-gate, Fitzgerald seemed to fast-track this by going for the indictments himself. Does the relative speed wind up working to the president-elect's favor?

WOLFFE: I'm not sure that it does actually, because what Fitzgerald has shown, he is fully capable and aware of doing it. He's putting the screws on people after he indicts. So, you know, when you get people in the spotlight and they're looking at possible jail terms, they start to sing.

So, I don't know that speed has anything to do with it. What obviously is a very good sign, as you point out, Blagojevich did not have a high opinion of the kinds of responses he was getting from the president-elect's office. That's the best position that Obama has right now.

OLBERMANN: You've said (ph), that is to put it mildly and also non-obscenely.

"Newsweek" magazine's and MSNBC's own Richard Wolffe-as always, thanks, Richard.

WOLFFE: Thank you, Keith.

OLBERMANN: The auto bailout now being held up, it seems, by a senator previously felled bay scandal involving a prostitute. The nomination to the secretary of state being criticized by a former White House political adviser previously felled by scandal involving a prostitute. The governor of New York now having to appoint a senator-in the new world of Blagojevich in a point for profit schemes-himself in office only because of the resignation of his predecessor, previously felled by a scandal involving a prostitute.

There's a theme emerging for the rest of tonight's news, but I can't quite put my finger on what it is.

(COMMERCIAL BREAK)

OLBERMANN: The last-minute push to punish the auto industry's unions and to give Republican senators something to bitch about, the bailout of Detroit or as Carlene Carter once saying, "Never together but close sometimes."

Later, astronomers chime in on the exact month and date Jesus might have been born. Hint: Billo the Clown is not going to like this.

And in Worsts: When Billo the Clown doesn't like something, it gets bleeped even if it's a harmless joke on his own network. The latest smoky controversy at FOX noise-ahead on COUNTDOWN.

(COMMERCIAL BREAK)

OLBERMANN: Actual conversation this morning, me, "It's up to $160 million." Somebody else, "What? $160 million? The auto bailout?" Me, "No, C.C. Sabathia's new contract with the Yankees."

Our fourth story tonight: No, not the Yankees, the survival of G.M. and Chrysler, Ford not needing any money right now. The House debating the bill tonight. Earlier today, Democrats and the White House agreed to emergency relief to prevent the collapse of G.M. and Chrysler, and map out the road for their long-term health, it's worth $15 billion, or for some perspective, it's worth 656 years of C.C. Sabathia.

One speed bump: Congressional Republicans. Some of them are threatening to filibuster.

(BEGIN VIDEO CLIP)

VITTER: So, we give them significant amounts of money, $15 billion, so that they go through that process, so that they start that discussion, so that they come back to us months later with a detailed restructuring plan. Well, my reaction to that is pretty simple-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?

(END VIDEO CLIP)

OLBERMANN: Actually, average Americans know that emergency relief tends to come before long-term survival efforts, which is why you so rarely hear the paramedics use this phrase. First, you give up smoking and then you get CPR.

Vitter's failure to recognize ass-backwardness, by the way, especially surprising coming from a man whose name appeared in the phone records of the D.C. madam. Filibuster? He didn't even know her.

What's the deal? For one thing, the White House insisted on letting automakers appeal court rulings that they have to abide by state emission standards, in other words, taxpayer dollars that were supposed to help the automakers go green will now help automakers fight taxpayers in court for the right not to go green.

One concession Democrats did win, the Cerberus hedge fund which owns Chrysler but refuses to put its money into it, will be on the hook if Chrysler defaults. Cerberus' chairman is John Snow, who used to be President Bush's treasury secretary, all of which makes perfect sense if you remember that Cerberus is Greek for the three-headed dog from hell.

Nevertheless, Republicans want more concessions from the unions, even though the automakers already are slashing jobs and the union already signed the contracts to bring wages in line with non-union workers.

With us tonight, Chris Hayes, Washington editor of "The Nation" magazine.

Good evening, Chris.

CHRIS HAYES, THE NATION: Hey, Keith. I hope you got that check I sent you for tonight's appearance.

OLBERMANN: Yes. Thank you very much -- $1.18.

(LAUGHTER)

OLBERMANN: The filibuster threat here is partially Senator Shelby's of Alabama and I'm missing something in this equation. Alabama has given more in tax subsidies per job for non-union jobs at foreign automakers plants in Alabama than Detroit is asking to save union jobs for American auto manufacturers. I'm missing something here.

HAYES: Well, you're not missing anything. I mean, this is the worst kept secret in Washington when you talk about the auto bailout. Every time you see Carl Levin and see Janet Granholm or any Michigan politician, there's an implicit understanding and there's a treatment from the press that they are representing distinct and, sometimes, narrow geographical interests of the people they represent.

The same, though, is true of a lot of the politicians from the southeast, particularly Alabama. The largest industry in Alabama is the car industry. And, you know, we're talking about, you know, throwing taxpayer dollars at the Big Three. Well, they've been throwing taxpayer dollars at Toyota for years in Alabama, and no one raises a stink about that.

OLBERMANN: And to what degree also is in this an opportunity that the Republicans see for kneecapping a big union?

HAYES: Yes. I mean, at the level of power politics, I think that's a huge part of it, and you see it in terms of you read the conservative press. People are obsessed with the erroneous number that is somehow $70 an hour in labor. We know that's not true. David Leonhardt had a very good piece from "The Times" on that today.

Labor is not the big issue. Labor costs are the not big issue. There are a lot of issues.

But car companies across the world are in very bad shape right now. They're in bad shape in Sweden. The car companies in France have required a government bailout and the Japanese car companies are in bad shape.

So, the Big Three have a lot of long-term problems and they've been very mismanaged. I think there's sort of a consensus on that. But the acute crisis is not due to those long-term trends necessarily.

OLBERMANN: So, well, the converse part of about this politically, though-are Democrats buckling here just to get something done? I mean, the "car czar" was supposed to be able to block deals of $25 million or more if he thought they were antithetical to the success of the organization.

HAYES: Right.

OLBERMANN: Now, that's been raised to $100 million. The limits on payments to executives are not really limits of any kind. Bonuses can still go ahead. Don't do it if it's going to hurt the company, which is really a strong language.

HAYES: Right.

OLBERMANN: And the Republicans are going to get at least some rollbacks on these environmental issues. How much more can the Democrats bend on this and why are they bending even this much?

HAYES: Well, that was a great question. I don't know how much more they can bend. I think you're right that the exegeses of the moment are making them give away a lot. The problem is, nobody in the entire universe right now has any leverage over the White House. I mean, really. It's crazy. I mean, it's not dissimilar to what's going on in Illinois, right? I mean, no one can make this guy do anything.

And so, if you really think that what you're staring down the barrel of is a catastrophic bankruptcy which would involve possible job losses up to 3 million people, then the crisis atmosphere, which we've been kind of legislating under for several months now, is what's really guiding the legislative process more than any sort of long-term view of what you want your strategic outcomes to be.

OLBERMANN: This is utterly off the topic and we'll talk about it another time. But I'm beginning to think we need a constitutional amendment to shorten the transition period between the election and the inaugural, like maybe 48 hours or something.

HAYES: Yes, it's a good point.

OLBERMANN: Last on this point, the David Vitter argument today: This boils down to first you guys stop bleeding, then we'll give you band-aids. That makes as little sense as saying-we're just going to throw all the money here in a big pile and you can come and get it as you need it.

HAYES: Yes, look, I mean, David Vitter's a joke. I mean, there's no real reason to pay much attention to what he says. I mean, the fact of the matter is, for a certain contingent of the Republican Party-and Richard Shelby is among this-and Shelby to his credit opposed the financial bailout. So, he's on pretty firm ideological footing.

For them this is a core issue, right? I mean, for conservatives, there is a sort of upside to broad economic pain that can come with the disillusionment of these companies, and that is the kind of creative destruction of capitalism. The question is, you know, can we deal with that right now or will that be too much for this economy to bear?

And, you know, for the Republicans that stick to their guns, you know, I guess, God bless them, but I don't think the rest of the country necessarily wants that.

OLBERMANN: Chris Hayes, the Washington editor of "The Nation"-as always, great thanks, and thanks for the $1.18 check.

HAYES: Anytime, Keith.

OLBERMANN: All right.

Oh, it's back. The video that tied the bow on the brief ascendancy of Sarah Palin and what's shown here are they selling on eBay?

Plus, censorship on fixed news? To protect Billo from an evil joke?

Worst Persons is ahead on COUNTDOWN.

(COMMERCIAL BREAK)

OLBERMANN: Bests in the moment. And Merry Christmas-six months from next Wednesday.

First on this date in 1915, Woodrow Wilson became the last president to marry while in office, taking as his second wife a woman he had met just nine months previously, Edith Galt. The risque joke of the time went like this: Question, "What did Ms. Galt do when the president proposed?" Answer, "She fell out of bed."

Let's play Oddball.

I love that joke.

We begin in Wasilla, Alaska where we know the fate of the unfortunate turkey shown here. No, no, the one stuck in the cone of death behind the governor. Well, apart from the obvious part we know the outcome. He ended up on eBay-all 37.7 pounds of him, complete with a letter of authenticity signed by the owner of the Triple D Farm and Hatchery. That's him holding the famous gobbler, right there. Again, in the front.

Advertising the bird is the world renowned turkey which was featured 20 feet behind Governor Sarah Palin-featured. Like he had a choice, the turkey did. The owner also promised that, quote, "The lucky winner of the turkey will have something to talk about for years and years to come." Adding, "Thank you for viewing my auction and God bless America."

America not blessing him back however. There's only one bid on the bird for $225. Rich Lowry of the "National Review," is that you?

In L.A., Mike Spalla and his nine so-called "jingle cats" made it through DVD just in time for the holidays because nothing says Christmas like the sound of cats yowling along to carols.

I don't know what's happened to them but save them, please. That's the whole thing. That's it. One year moratorium declared now on all Christmas music starting today.

Finally to tire in Lebanon, where this bearded knobby thing is apparently the world's biggest potato. The Lebanese father who grew the massive spud insists he did not use any fertilizers nor chemicals. He still managed to produce 24.9 pounds of tuber, nearly 18 pounds more than the current world record holder, which is a seven pounder, grown a decade ago in the Isle of Man. The international volunteers, sour cream suppliers without borders, reported headed to Lebanon as we speak.

Does Caroline Kennedy want to be the junior senator from New York?

That's still one of those kickback-free appointments, right?

And manna from political comedy heaven, Governor Rod, "he's bleeping golden and I'm just not giving him up for bleeping nothing" Blagojevich.

These stories ahead but first it's time for COUNTDOWN'S best persons in the world. Number three, best dumb criminal. The intriguingly named Honesty Knight of Munsey, Indiana. She was stopped by a state cop-a trooper for a traffic violation. She asked the officer if it was okay if she lit up a cigarette. Incredibly it was not a tobacco-based cigarette for which she craved. It was a joint. The officer then arrested her.

Number two best throwing under the bus, Joe the Plumber Wurzelbacher- that's a blast from the past. In a radio interview throwing under the proverbial bus John McCain saying that while on the McCain campaign bus, he asked republican nominee about the bank bailout and got answers that, "appalled me absolutely. I was angry. In fact, I wanted to get off that bus after I talked to him." Of course if he really objected he could have really done that but what would have happened then to his book and his recording contract and his congressional candidacy?

The number one best real war on Christmas. Australian astronomer Dave Reneke. London's newspaper "The Telegraph" quoting him saying new computer technology permits him and his colleagues to create any night sky of the last thousand years and by comparing the so-called Christmas star with astronomical history they have concluded that if it really happened it wasn't just hyperbole. What people would have seen above Jerusalem was the conjunction of the planets Venus and Jupiter, so close that night they would have seemed like one giant star. Thus the conjunction, the Christmas star and the night of the birth of Jesus all in the year 2 B.C. on the 17th of June.

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OLBERMANN: Given the absolute freaking chaos still expanding from the big ban of corruption in Illinois, the debate on whom the governor of New York will appoint to fill a vacant seat in the senate sounds like an argument over whom got the 13th donut. Our third story in THE COUNTDOWN. David Patterson has spoken to Caroline Kennedy but not to Ted Kennedy but has he spoken to another self-declared candidate, Fran Drescher? One day after "The New York times" reported t hat Senator Kennedy had been calling New York's governor to push for his niece to get that seat, Governor Paterson said he has not spoken to Senator Kennedy in years and the senator's office said, "He has done no lobbying." As to the comedienne, she is serious, pointing to her years as a public diplomacy envoy for the State Department and as an advocate for women's health.

Joining me now, political columnist with Bloomberg News and Washington editor of "The Week" magazine, Margaret Carlson. Good evening, Margaret.

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

OLBERMANN: Could you have ever imagined that the subject of who would succeed Hillary Clinton as senator from New York because she is going to be Barack Obama's secretary of state could win contrasted to this lunacy in Illinois be so utterly mundane and even boring?

CARLSON: I was going to write about Caroline Kennedy today until I was overtaken by events. You know, no matter how cynical you are, this really takes your breath away because of just the extent of what Blagojevich had in mind for that senate seat.

He had this shiny thing in his hands and he just wasn't going to give it away.

OLBERMANN: Yes he was going to do everything but turn it into a McDonald's franchise. What he did or what he is-again, everybody seemed to have dropped the word allegedly on this, what he allegedly did, does this impact Governor Paterson's decision in New York even just in terms of the degree of transparency that might be required now?

CARLSON: Well, giving away-appointing somebody to a senate seat is one of the least transparent actions that there is in a government that doesn't have a lot of it to begin with. Because, you know, Fran Drescher can say "I'm running" because you don't have to do anything except get selected.

But unless he's wired, he doesn't have to be particularly transparent because we don't require it. You know, what Blagojevich did was he went way too far and he had to know he was wired and he was wired. There's a thin line, Keith, between calling up and saying why you'd be good for the job and then telling the other person, say David Paterson, why it would be good for him to pick you for the job. And in Blagojevich's case, he wanted to know exactly how good it would be for him to start with in terms of money or jobs or, you know, something-a corporate board for his wife or the McDonald's franchise, as you say.

OLBERMANN: Right, in a measurable way, not one of these esoteric, oh, it will be good for your soul, or good for your career. But he wanted to be able to just quantify it. That's all he wanted.

CARLSON: Quantify- well, he said, quote, he wanted tangible-something tangible up front. He was taking no chances.

OLBERMANN: Now back in New York is it going to be Caroline Kennedy and with no offense to her should the senate be somebody's, anybody's first public office?

CARLSON: Well, a lot of people get their first public office in the senate in the way it works. Some people buy it. Some people are celebrities and Caroline Kennedy is a combination of a couple of things. She has written six books. She is a constitutional scholar; she is a Kennedy so she's been in the world of politics all her life even though in the background.

She seems to have come out-you know, most of what I saw Caroline Kennedy she was in mourning. Then she comes out as a political figure during the Obama race and she handles herself very well. And I believe her when she says this was the first time that she was inspired by an actual candidate since her father.

So I don't think it would be all that bad. By the way in 2010 she'll be able to raise the money to launch her own race, which I don't think Fran Drescher would be able to do.

OLBERMANN: To that last point, a lovely woman, excellent use of her celebrity for the public good but, again, first office, Senate? I'm having a disconnect.

CARLSON: Well, I don't know I think she'd do better off on "Wife Swap" or "The Nanny," on ABC. The new nanny, the reality TV nanny. No, it's not the hardest job in the world. Being governor you have to produce. Being mayor you really have to produce. But still, I would say that the nanny should look for another line of work.

OLBERMANN: Margaret Carlson of Bloomberg News and "The Week" magazine as we continue to let the swelling go down from the Blagojevich news and it bleeds over into New York. Great thanks, Margaret.

CARLSON: Thanks, Keith.

OLBERMANN: The joy of Blagojevich-ing. Comedy gold in a profit-driven governor; rather than a prophet from Illinois.

And guess who can't take a joke especially on his own network? What they bleeped on fixed news to protect Billo the Clown.

And coming up when Rachel Maddow joins you for "Top of the Hour" her special guests, the clean, cold Christmas carolers?

But first because they're not going away soon enough, the headlines breaking in the administration's 50 ranked scandals. Bush.

Number three Union busting-gate. Well we wonder if he might put in a car czar whose primary job is it to break up the UAW. Mr. Bush has already tried to bust up unions at the ATF, the Bureau of Alcohol, Tobacco, Firearms and Explosives. He issued a presidential order stripping the rights of 1,500 employees there to be in a union or have any kind of collective bargaining. His argument they do national security work therefore a union could get in the way. This might be in the dictionary under the definition of sophistry. It might also be in the dictionary under the definition of union busting. The Bush Administration had just signed a new collective bargaining agreement with those 1,500 ATF employees last April and at no point did anybody in the government say, "Your union is threatening national security or you have no right to this contract. We all just sat here and bargained over and we just signed for some inexplicable reason."

Number two, Preston hollow-gate. That is again the section of Dallas to which Mr. Bush and the Mrs. will mercifully retire next month. Todd Gilman of the "Dallas Morning News" asked Mr. Bush the softest of softball questions about his impending new home and got a genuinely strange answer even from this guy. Gilman, "Mr. President, are you excited about your new house in Dallas?" Bush - "Todd why do you care? You live in Washington, D.C." Well, evidently Gilman cared in a (inaudible) "Do you like the neighborhood? Can you get to the ballpark easily" kind of way, although the rest of us sure want to know about the covenants created when that exclusive neighborhood was first built in which neighbors first swore to not sell homes to black people.

And number one, Condi-Gate. Well it was nice while it lasted. Secretary of State had just begun to rehabilitate herself ever so slightly complimenting the president-elect, the people who voted him in, showing a little pride as an African-American as an American. Then came her interview with NPR in which the questioner mentioned Guantanamo wasn't sort of the only issue that tarnished the U.S. image, there's also the treatment of terror suspects, water boarding, other methods of torture or - that's when Dr. Rice interrupted. "I'm going to have to object" she said, "because the United States has kept to its international obligations which includes international obligations on the convention on torture. The United States, the president was determined after September 11th to do everything that was legal and within those obligations, international and domestic laws to make sure we prevented a follow-on attack."

Well, you can object all you want and you and the boss can have been determined all you want but in terms of keeping this country's international obligations on the convention on torture and doing everything that was legal and within those laws, you failed. You utterly, absolutely, no question about it failed. Didn't come close. Madam Secretary, you, the president and the rest of the cabal will go down in the history books as a bunch of extra-constitutional, treaty busting rodeo clowns.

(COMMERCIAL BREAK)

OLBERMANN: The breaking news from Washington at this hour, the House has voted to approve the bailout of the auto industry, Ford and Chrysler anyway. Valued at between $14 and $15 billion. The bill still faces some republican opposition in the senate and a filibuster threatened by senators from one state in particular with many foreign auto maker factories, that would Alabama, but to repeat tonight's headline, the House has already passed the GM and Chrysler bail-out bill.

Meantime, he thought somehow that he could blackmail the "Chicago Tribune" get kick-backs from a kid's hospital, sell off a vacant senate seat, call the president-elect an mf-er and then succeed him in the white house in 2016. Rod Blagojevich, a million good government citizens weep but twice as many comedians stand up and cheer.

But first the worst - Dick Morris and Steve Doocy competing with whoever in fixed news censored a fixed news show to protect the name of a fixed news celebrity from a joke about marijuana. You're watching COUNTDOWN on MSNBC.

(COMMERCIAL BREAK)

OLBERMANN: The sheer exuberant, nutty as a fruit cake if you're going to be corrupt be boss tweed kind of corrupt story of Governor Rod Blagojevich, that's next.

First time for COUNTDOWN'S number two story, tonight's worst persons in the world. Oh how exquisite, all fixed news edition. I always like these.

The bronze to Dick Morris in year 12 of his endless vengeance campaign against the Clintons. "I've always hated about Hillary," he said alongside the manatee "is the phoniness. I'm from New York. I'm a Yankee fan." There's a photo from 1992 with the secretary of state nominee wearing a New York Yankees cap and a "Washington Post" article from 1994 that she said she, quote, "As a kid was a big-time fan of the Chicago Cubs and New York Yankees and, quote, understudied Ernie Banks and Mickey Mantle." Not only were those instances of Yankee fandom that predated Clinton's claims in 2000 that she was a Yankee fan while running for senate from New York, but they were even before Dick Morris had to resign as President Clinton's top political adviser because he let a prostitute listen in to one of his conversations with the president on the phone.

The runner up Steve Doocy of the vendetta filled show "Fixed News and Friends" telling an interviewer that, quote "when somebody takes a shot at us on this show because it's so light at times, we do on occasion take some shots. It's never in an over-the-top way." Never in an over-the-top way. Yes, like the time they didn't like an article from Jacques Steinberg of "The New York Times" so they took photos of Steinberg and the editor Steven Radcliffe and altered them before putting them on the air to make them look like anti-Semitic caricatures. Never in an over the top way, mind you.

But our winner Bill O. or somebody working on his behalf, FOX's show "Red Eye" he's sometimes very funny, sometimes very crass, sometimes very stupid and last night it was very censored internally. Check out this clip from David Bienenstock, the senior editor of "High Times" magazine guesting on the program, the guy who gets censored here is "Red Eye" writer and producer Bill Schultz.

(BEGIN VIDEO CLIP)

DAVID BIENENSTOCK, "HIGH TIMES" SENIOR EDITOR: Well, a couple minutes ago I was in your greenroom and it definitely lived up to the name so I'm ready to go. FOX news has the best weed in the world. I was really surprised by that.

BILL SCHULTZ, WRITER/PRODUCER: ( bleep ) does not like it when you get into his personal stash. I'm calling security.

(END VIDEO CLIP)

OLBERMANN: Bienenstock says what he heard bleepy Schultz say was "Mr. O'Reilly does not like it when you get into his personal stash sir, I'm calling security" and they bleeped his name. The dark side here, these "Red Eye" guys don't need me defending them, they work for FOX, they got enough problems. But in bleeping the obvious joke about Bill O., there's the unintended bright side. Somebody somewhere heard that and just assumed that what Schultz had said had been so horrible that it had to have been bleeped must have been "Mr. Murdoch does not like it when you get into his personal stash, sir." Billo the bleep. Today's worst person in the world!

(COMMERICAL BREAK)

OLBERMANN: I'm not sure he's playing with a full deck anymore. That's the judgment of Illinois state senator, Mike Jacobs, a former friend of Governor Rod Blagojevich. Gee, way to go out on a limb there, buddy.

Of course on our number one story on THE COUNTDOWN, take a look at the bright side of a literally crazy governor. A million comedians have something to work with. The man accused of holding up financing for a children's hospital for personal gain evidently upped his game when he got the chance to fill President-elect Obama's senate seat. A mere sampling from wire taps of the governor detailed in the indictment, talking with his Chief of Staff John Harris on November 4th, the governor poses a hypothetical fantasy conversation he could have with the president-elect.

Analogizing the situation to that of a sports agent shopping a free agent to various teams. The president-elect, you want it, fine, but it's got to be good or I could always take it.

November 5th, "I've got this thing and its bleeping golden and I'm not just going to give it up for bleeping nothing." On a November 10th call that included his wife shouting profane support in the background. The governor's consultants having suggested he should count on nothing for President-elect Obama, so the governor complains about giving this mother blanker, the president-elect, his senator, blank him for nothing. Blank him. That doesn't stop his scheming. On a November 11th phone call governor allegedly asked advisers if they think Mr. Obama can get Warren Buffett or others to put up $10 million to $15 million for a foundation he could head.

And over just the last month, the governor spends considerable time weighing prospects of appointing himself as senator, using it would not only be a good platform for a presidential run in 2016 but also, and this is very bright of him, a way to avoid impeachment by the legislature. Let's turn now to my friend, comedian Alan Havey. Good evening sir.

ALAN HAVEY, COMEIDAN: Hi, Keith. It's bleeping great to be here.

OLBERMANN: It's always bleeping good to see you. Let me start with a comedy industry question. Is there any truth to rumors that Governor Blagojevich's dreams of a financial empire through corruption that this was all being underwritten by the national association of political humorists because he's comedy gold?

HAVEY: Well, I don't know about that but he is gold. He's gold covered in platinum on a bed of fresh cut blood diamonds that fell out of Ivana Trump's bleep.

OLBERMANN: With the allegations of a mountain of the old-fashioned easy to understand, corrupt for money schemes, could you take a stab at explaining what might have been in the governor's head other than maybe a 2 x 4?

HAVEY: Oh, dryer lint, a slinky, a pair of old boxer shorts from Mayor Daly, visions of sugar plums hand-made by Martha Stewart stuffed with her 401(k) plan.

OLBERMANN: Steady on Martha, she watches the show. The idea he could get himself now named the chief of some sort of charitable foundation. This is a particularly picturesque almost. What kind of foundation do you think would have suited him?

HAVEY: The Al Capone STD foundation for deep dish venereal disease.

I don't think Al Capone watches the show so we're safe with that one.

OLBERMANN: Also as we're seeing here this picture of him in the other corner, the governor is reportedly known for having a love of Elvis. Does this explain this hairdo, this Martin Sheen from the "Dead Zone" hairdo he has?

HAVEY: I don't know if it explains the hair but it's going to come in handy for his cell mate in prison, sweep that up into a nice bouffant, maybe some fishnets with spiked heels and it's going to make a hell of a handle if you know what I mean.

OLBERMANN: Yes, but you're forgetting about the fact three of the previous six elected governors of Illinois also went to prison. The odds that he'll be rooming with another former governor of Illinois are actually pretty small.

HAVEY: Yeah. I guess you're right about that. I think they're going to make a new governor's wing in the prison.

OLBERMANN: Yes, they have already got one already. And speaking of things that are available here already, they've got T-shirts out. Day two of this, take a look at this. Somebody besides the governor is going to make money off this senate. There's a certain irony to this that somebody besides the governor is going to make money from his efforts to sell this senate seat.

HAVEY: As well they should. It's good for the economy. I mean, bumper stickers in Illinois. Our governor has a weirder name than Barack Hussein Obama. Listen, if he looked like Tina Fey by this time next year she could buy New Jersey.

OLBERMANN: And there's another-again, the beauty of Blagojevich is it's old-fashioned stuff. It's like, you know, turn back the clock day at the ballpark. The governor is accused of scheming to get at least one member of the "Chicago Tribune" editorial board fired. He does-there's certain in this craziness certain majesty, a certain admirable quality, isn't there?

HAVEY: Yes, he's a big fan of Turner classic movies. You know, not only that he wants a permanent suite at the Lexington, bad boy's life at Wrigley. I don't think anything is going to stop him.

OLBERMANN: Who's the guy who played the evil politician in "Mr.

Smith"? Edward Arnold. That's who he is. He's Edward Arnold only thinner.

Last thing, this is from your terrain. The candidate for senate from New York, Fran Drescher.

HAVEY: Oh, perfect. If you watched the old show, you know she's up on domestic issues. I think she'll bring a fresh, whiny, high-pitched irritating voice to congress. Filibusters that will make your ears bleed and if she doesn't get appointed I heard ex-governor Elliot Spitzer has already made a bid on her seat.

OLBERMANN: Comedian, Alan Havey. Marvelous material, my friend. Good to talk to you.

HAVEY: Thank you, Keith.

OLBERMANN: That's COUNTDOWN for this. The 2,041st day since the declaration of mission accomplished in Iraq. I'm Keith Olbermann on that high note, good night and good luck.

Our MSNBC coverage continues now with "The Rachel Maddow show" and her special guest tonight the clean coal Christmas carolers you say?

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

END

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