updated 12/12/2008 10:49:09 AM ET 2008-12-12T15:49:09

1600 PENNSLYVANIA AVENUE

December 11, 2008

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

Guests: Michael Isikoff, John Harwood, Joan Walsh, Lawrence O'Donnell, Mike Dorning, Daniela Schreier, Larry Grimm, Jonathan Alter, Michael Beschloss

DAVID SHUSTER, HOST: Tonight, damage control. President-elect Barack Obama tries to distance himself from an arguably delusional and allegedly criminal governor of Illinois, who still refuses to leave office. But there are still some things Mr. Obama can't explain as he transitions to 1600 PENNSYLVANIA AVENUE.

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

Welcome to the show. I'm David Shuster.

The headline tonight, "Unanswered Questions."

Amidst indications that an adviser or representative of President-elect Obama may have heard Rod Blagojevich allegedly attempting to sell Obama's vacated Senate seat, today Mr. Obama spoke to the press. But the president-elect declined to say who his representative on the phone with Blagojevich may have been and what that person heard or did. Instead, the president-elect declared that nobody close to him would engage in any scheme and that the Senate seat never came up in Obama's own conversations with Blagojevich.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: I have never spoken to the governor on this subject. I am confident that no representatives of mine would have any part of any deals related to this seat. I think the materials released by the U.S. attorney reflect that fact. I have asked my team to gather the facts of any contacts with the governor's office about this vacancy so that we can share them with you over the next few days.

(END VIDEO CLIP)

SHUSTER: If Mr. Obama's staff knew Blagojevich was attempting to sell the Senate seat for cash or a cabinet position and they didn't call in the FBI, that could be embarrassing and damaging to Obama. On the other hand, if it was somebody close to Obama who told investigators, perhaps in the first place or early on, Obama will be insulated from the Blagojevich fallout.

The intrigue now revolves around a key meeting and conference call on November the 10th. According to the criminal complaint, it went on for two hours and included Governor Blagojevich, his wife, his general counsel, an unnamed adviser, the governor's chief of staff and various Washington, D.C. , based advisers that the FBI has not named.

The criminal complaint says Mr. Blagojevich discussed ideas for cashing in on the power to name Obama's Senate successor. The Blagojevich discussion included "what he can get from the president-elect for the Senate seat."

During the meeting, Governor Blagojevich complained about his financial situation. "The immediate challenge is, how do we take some of the financial pressure off of our family?"

A few hours later there was a stunning report from CNN. "Two Democratic sources close to President-elect Barack Obama tell CNN that top adviser Valerie Jarrett will not be appointed to replace him in the U.S. Senate."

At the time, reporters, including myself, were convinced that Valerie Jarrett was highly interested in the Senate seat. So the report was a remarkable turnaround, and it was punctuated two days later by Jarrett herself during an interview on PBS.

(BEGIN VIDEO CLIP)

VALERIE JARRETT, OBAMA ADVISER: Well, you know what? I'm actually not interested in the Senate position. What I said to President-elect Obama-as you know, he's a very dear friend, he knows me well. And just as all Americans, I'm happy to serve my country at the pleasure of the president, in any way he deems fit.

(END VIDEO CLIP)

SHUSTER: Was Obama's top adviser Valerie Jarrett one of the Washington participants on that crucial Blagojevich conference call, or did somebody tell her about that call?

Joining us now is "Newsweek" reporter Michael Isikoff.

And Michael, it does seem like Jarrett's interest in the Senate seat made a sharp turnaround right around November 10th. What do you make of that, and what do you know about the crucial November 10th call?

MICHAEL ISIKOFF, "NEWSWEEK": Right. Well, look, there's a couple of different ways to read this.

In every other case when there's a reference to one of the Senate candidates, the complaint, the criminal complaint, the sworn affidavit from the FBI agent, says "Senate Candidate One," "Senate Candidate Two," "Senate Candidate Three." So it would be a little unusual and out of context here, out of place, if in this case they referred to Valerie Jarrett, who is otherwise referred to as "Senate Candidate One" as a Washington, D.C., adviser.

I don't think they would be that slippery. So I tend to doubt that she was on the call.

On the other hand, I think the question you are raising is, did she or somebody in Obama's camp somehow get whiff of what Blagojevich was up to and therefore took her out of-asked her not to take the Senate seat for that reason? We don't know that. That's sheer speculation at this point.

She says in that interview she wasn't interested. I have been told privately by people close to Obama that Obama wanted her in the White House. At least that is the word they are putting out. So, while the timing is interesting, I don't know that we've...

SHUSTER: The leaks coming just hours after. I mean, there were no other types of those leaks. There were very few leaks coming from the Obama transition that first week.

ISIKOFF: Right.

SHUSTER: It just...

ISIKOFF: Look, it could be a combination of factors. It may be that Obama did want her. It may be that somehow they got wind of this. And that leads I think to the question you were raising at the top of your show about, Obama was very careful in his wording today. He said he had no conversation with Blagojevich about this matter.

He said aides to him had not participated in any deal-making along the lines of pay to play. He did not say that his aides knew nothing about what Blagojevich was up to.

SHUSTER: Well, you have hit on some things that struck me today as incredibly curious. So let's play some of the tape. Here's the first sound bite that struck me.

Watch.

(BEGIN VIDEO CLIP)

OBAMA: I had no contact with the governor's office. I did not speak to the governor about these issues. That I know for certain.

What I want to do is to gather all the facts about any staff contacts that may have taken place between the transition office and the governor's office. And we'll have those in the next few day and we'll present them.

(END VIDEO CLIP)

SHUSTER: "I had no contact with the governor's office." Well, actually, he met with the governor on November 5th, which probably explains Obama catching himself and qualifying it with-about these issues.

Also, when he talks about staff contacts that may have taken place, well, we know there had to be some simply in the transaction of Obama vacating the seat.

Now, here's another thing that caught my attention.

And Michael, I'll run it by you after this.

Watch.

(BEGIN VIDEO CLIP)

OBAMA: I have not been contacted by any federal officials. And we have not been interviewed by them, as is reflected in the U.S. attorney's report.

(END VIDEO CLIP)

SHUSTER: Now, if it's true that Obama has not been in contact with investigators, it's also true then that he is not under any orders by them to keep information under wraps. So at the moment there is nothing keeping President-elect Obama from telling us from his transition was the liaison point for the governor's office-Michael.

ISIKOFF: Right. And frankly, I thought they would have done that by now. I don't think it would be that-I don't think the contacts would be so numerous that it would take them several days to compile.

So from a strictly public relations point of view, I think they

probably would have been better served by getting this out yesterday rather

and if not yesterday, today. I don't know why it's taking a few days, unless everybody who did have such contacts has to be very closely questioned by Obama's lawyers and, you know, to go over everything those individuals might have known.

SHUSTER: There has been some speculation out there that perhaps somebody from the Obama transition got a whiff of this and called up Fitzgerald and said, hey, this is going on, you need to stop it. The thing that doesn't make sense about it though is the timeline. Fitzgerald and the FBI were already doing some of these wiretaps, tape recording some of these phone calls, before even somebody from the Obama transition might have realized...

ISIKOFF: That began in October.

SHUSTER: Right.

ISIKOFF: That began in October. So that would seem to be before the Obama people, the transition people, would have become aware of it. But look, you don't know.

I mean, maybe they learned about it later and went to Fitzgerald themselves. I mean, it's hard-there is no evidence of that. There was one Chicago Fox affiliate that reported that Rahm Emanuel had done that. There has been no confirmation of that, certainly not from Rahm Emanuel's office.

SHUSTER: But politically, you would acknowledge that's huge, because if Obama's team gets wind this is going on and they say, you know what? We are just going to take ourselves out of contention by not telling anybody, that is a huge problem, whereas if they got wind and they said this stinks, we've got to tell them...

ISIKOFF: Right. Look, there's another part of the complaint which I thought you might want to focus on which refers to Blagojevich wanting to send a message to an Obama adviser-they don't identify who it is-about his interest in having set up this political group and raising $12 million, $15 million, and he wanted that in the guy's head, in the adviser's head, when he had a discussion with that adviser about filling the fifth congressional district. The fifth congressional district seat is the seat held by Rahm Emanuel, it was the seat previously held by Rod Blagojevich.

SHUSTER: Michael Isikoff of "Newsweek."

Always a pleasure, Mike. Thanks for coming in.

ISIKOFF: Thank you.

SHUSTER: Up next, from the investigation questions to the political, how is President-elect Obama handling his first post-election storm? Our panel weighs in on Obama's damage control, message management and overall approach when 1600 returns.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: What I'm absolutely certain about is that our office had no involvement in any deal-making around my Senate seat. That I'm absolutely certain of. And that is-that would be a violation of everything that this campaign has been about, and that's not how we do business.

(END VIDEO CLIP)

SHUSTER: That was President-elect Obama at his news conference this morning vouching for his team and assuring reporters that no one involved in his campaign or his transition would have been involved in the pay-to-play scandal engulfing Illinois Governor Rod Blagojevich. But there's still some outstanding questions about what some key Obama confidantes knew and when about the alleged Blagojevich scheme.

Joining us now is John Harwood, CNBC's chief Washington correspondent and a political writer for "The New York Times"; Joan Walsh, editor-in-chief of Salon.com; and Lawrence O'Donnell, MSNBC political analyst and former chief of staff to the Senate Finance committee.

John, somebody on the Obama transition was a designated liaison to Governor Blagojevich. What is the advantage of the Obama transition still trying to keep that under wraps?

JOHN HARWOOD, CNBC CHIEF WASHINGTON CORRESPONDENT: Well, Obama said today he needs to gather that information. He indicated it would take several days. It's not clear to me why it would take several days, because how many people really going from the transition going to be in conversation with the governor himself or the governor's chief of staff?

But whenever that information comes together, that's going to have to get put out by the Obama team, and then we'll get a little more answers as to what might have gone on. And the question that you posed in the earlier segment, did someone hear about something that should have been reported or not?

SHUSTER: Lawrence, what is wrong with Barack Obama saying, you know what? Here is who my contact was. We haven't had a full chance to debrief that person and find out the facts. We want to do that first before we tell you, but we're not going to hide anything, everybody knows it was such and such.

What's wrong with that?

LAWRENCE O'DONNELL, MSNBC POLITICAL ANALYST: Well, you know, the transition office is in Illinois. The governor's office is in Illinois. People working on the transition, a lot of them are from Illinois.

The likelihood that they have casual acquaintances or friendships with people who work in the executive branch of the government in Illinois is extremely high. It would not surprise me at all if there were dozens and dozens and dozens of contacts with people associated with the transition office and people associated with the governor's office.

And trying to do that complete autopsy once, so that they make sure they get it completely right and they don't leave out three calls that get discovered two weeks from now, it makes sense to me that they slow it down that way. So I'm not surprised by that at all.

SHUSTER: Joan, here is what the Republican National Committee is doing, and clearly they're pouncing. "President-elect Barack Obama," in a statement they say, "continues to provide less than forthcoming answers to simple questions related to Governor Rod Blagojevich. While it is encouraging that the president-elect has stated his office will disclose contacts with the scandal-ridden governor, it remains disappointing that his actions are in response to political pressure. Americans expect the highest degree of transparency from their elected leaders rather than promises of openness on the campaign trail."

I'm not sure, Joan, that I agree that Obama is simply responding only to political pressure. But isn't the RNC correct when they describe Obama as providing less than forthcoming answers?

JOAN WALSH, EDITOR-IN-CHIEF, SALON.COM: No, I really don't think that's true, David. I agree with Lawrence on this one.

I think that they are being careful to take their time to accumulate the number of people who may have had some kind of conversation. I mean, look back at this campaign. The Obama people are nothing if they are no careful and thorough.

SHUSTER: Well, wait a second though. That's not inconsistent with the idea that they are being less than forthcoming. I mean, they can be less than forthcoming and also justify it for that very reason, right?

WALSH: Well, no. I just think that for him to go out and say, well, I think four or five people had four or five conversations, and then for us to come back and say, hey we found a sixth and seventh over here, is what they are trying to avoid.

Look, I know it's our job to ask questions, and we should be asking these questions, but I think we're really in danger of kind of going far beyond what the available evidence shows us. He has said he did not have this conversation himself. People in his office did. He will come back with a full accounting.

It has been 48 hours in a transition that's been marked by great organization, but also beset by unbelievable storms from Mumbai to Wall Street. I mean, this guy has a few other things going on. I think we are really blowing this out of proportion.

SHUSTER: And yet, John, the absence...

O'DONNELL: Can I just add, David...

SHUSTER: Yes, go ahead, Lawrence. Go ahead. Jump in.

O'DONNELL: There is also a possibility that someone in the Obama transition office is cooperating with Patrick Fitzgerald's investigation.

WALSH: Right.

O'DONNELL: And that some of this external communication to us has to be controlled by or checked by Patrick Fitzgerald so that the Obama transition office doesn't do anything that jeopardizes the prosecution going forward. That is another complicated piece of this which might or might not be present.

WALSH: Right. We don't know.

SHUSTER: I'm still a little puzzled though by David Axelrod, who a lot of us have known over the past year and a half. He said on a local Chicago television station recently that-he talked about Obama and Blagojevich and whether they had spoken about the Senate replacement. And he said, "I know he's (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."

And then two nights ago, Axelrod issued this statement: "I was mistaken when I told an interviewer 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."

John, everybody that I've spoken with who knows David Axelrod well says this is not somebody who simply goes on television and makes up things, flies off the handle, but he is extremely loyal to Barack Obama, which leads some people to suspect maybe he is throwing himself on the grenade here.

Is there a possibility that that's what's going on here?

HARWOOD: I don't know. Everything I know about David Axelrod tells me he's an honorable guy. He may have simply misspoken.

And when he said he's talked to the governor, well, yes, Barack Obama had met with the governor after the election, but he says not about this issue. So I'm not ready to draw that conclusion yet about David's comment. I think it's possible that he just said something without being 100 percent sure.

SHUSTER: Joan, how much time does Barack Obama have to provide some of the answers before it does become perhaps something of more than just a slight embarrassment?

WALSH: Well, you know, it's Thursday. It's probably good if he can do it before the weekend. But you know, to go back to something John just said, I mean, if you really think this through, why would Obama necessarily deny that he talked to Blagojevich if he had? It wouldn't necessarily be a terrible thing for them to have a conversation.

The one thing we know for near certain is that Blagojevich is caught on tape repeatedly railing about this word I can't say on your show, David I want to be invited back-who will not deal...

HARWOOD: Chicken!

WALSH: I know. OK. Don't dare me-who will not deal, who will not pay for play. That's the one thing we know, is that Obama is being vilified for being honest and not being part of this awful scheme. And yet, we are jumping to conclusions that he is hiding some kind of thing? I just think we're going to far, or in danger of going too far.

SHUSTER: Well, yes. But to your point, when he says-I mean, what's wrong with him saying he had contact with the governor's office? Except today he said, "I had no contact with the governor's office."

WALSH: Well, no. But that...

SHUSTER: And then he corrected himself and said, oh, I did speak to the governor's office, but not about these issues.

So, again, yes, I mean, you can parse the words a million different ways.

WALSH: Right.

SHUSTER: And maybe it's unfair of us to be parsing it the way we are. But again, absent some of these questions being answered, I think this hangs around.

In any case, Joan Walsh, John Harwood, Lawrence O'Donnell, thank you all very much. We appreciate it.

WALSH: Thank you.

SHUSTER: Today President-elect Obama tried to change the story by rolling out Tom Daschle as HHS secretary. But Governor Blagojevich had something to say about that, too, over a wiretap.

We'll tell you what he said when we go "Inside the Briefing Room," next.

But before we do that, bad news is always great news for the late-night comedians.

(BEGIN VIDEO CLIP)

DAVID LETTERMAN, "LATE SHOW WITH DAVID LETTERMAN": Number 10: "For 10 grand, can you make me pope?"

Number 9: "Hello, is the Blog-o-Bloga-a-da-go-bl-vipich residence?"

Number 9: "Hi, it's O.J. Want to be cellmates?"

Number 7: "Oh, I'm sorry, I think I have the wrong Blagojevich."

Number 6: "Hi, it's Larry Craig. Did I hear something about a senator's seat being available?"

(END VIDEO CLIP)

SHUSTER: We'll show you the top five later.

(COMMERCIAL BREAK)

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

And today Barack Obama nominated former Senate majority leader Tom Daschle to be secretary of Health and Human Services. This was the position that Illinois Governor Blagojevich thought he might be able to get in return for picking Obama's choice for the vacated Senate seat.

We'll have more on that in a second. But first, here is Tom Daschle.

(BEGIN VIDEO CLIP)

TOM DASCHLE, HEALTH & HUMAN SERVICES SECRETARY NOMINEE: It is a great honor to be nominated to work on an issue that is so close to my heart, leading an organization that touches so many lives.

(END VIDEO CLIP)

SHUSTER: That's one view. Governor Blagojevich seemed to have a slightly different priority in mind, one focused more on his own pocketbook. Here's what one of his advisers said as outlined in the criminal complaint.

"On November 5, 2008, Rod Blagojevich spoke with Deputy Governor A regarding positions that Rod Blagojevich might be able to obtain in exchange for the soon-to-be vacated Senate seat. Among the potential positions discussed were secretary of Health and Human Services and various ambassadorships."

Deputy Governor A noted that the cabinet position of Secretary of Energy is the one that makes the most money. Deputy Governor A stated that it is hard not to give the Secretary of Energy position to a Texan, but with Rod Blagojevich's coal background it might be a possibility."

So let me get this straight. If you want to rip off federal taxpayers with your (ph) corruption, it's better to be at the Department of Energy than at Health and Human Services?

Poor Tom Daschle. Even if he wanted to maximize the potential crookedness and corruption, now he's out of position.

Coming up, a lot of pundits and columnists have described Rod Blagojevich as insane. And there was certainly a lot of intriguing material in the criminal complaint. He exhibits delusions of grandeur, bizarre logic, and relies on an endless stream of f-bombs. So how does the governor's behavior stack up with real psychologists and psychoanalysts?

We'll talk to them just ahead.

(COMMERCIAL BREAK)

SHUSTER: Tonight, not the Chicago way; President-elect Obama says he's confident no one on his team was involved in any way with Illinois governor's alleged attempt to sell off his senate seat to the highest bidder. Will his confidence in his inner circle be validated?

Plus, new bizarre details about the guy who set this whole thing in motion, Governor Rod Blagojevich. Is he mentally unfit to govern? Two top psychologists have the answer as "1600 PENNSYLVANIA AVENUE" continues.

Welcome back to "1600 PENNSYLVANIA AVENUE."

Illinois Governor Rod Blagojevich today hang on to his office for another day eluding the media and ducking out of his house to an undisclosed location as more politicians join the chorus demanding that he resign.

(BEGIN VIDEO CLIP)

LT. GOV. PAT QUINN, (D) ILLINOIS: Well if the Governor doesn't act he will be impeached. Illinois does not want to go to Washington in this time of economic crisis without having two senators. So if I am governor I'm going to evaluate everything at that moment and decide what's best for the people.

(END VIDEO CLIP)

SHUSTER: The Illinois legislature will meet Monday to consider a law which would change state election law to fill the vacancy by special election. And Illinois's attorney general Lisa Madigan said today, that if Blagojevich did not step aside she would go to the state Supreme Court and force his hand.

Tonight, there are also reports that Federal prosecutors have test subpoenaed documents from the "Chicago Tribune's" parent company. This is Illinois Deputy Governor Louanner Peters has been identified as Senate candidate # 4 four in the Blagojevich criminal complaint.

Joining us now to sort out all of this in the Blagojevich investigation is "Chicago Tribune" reporter Mike Dorning. And Mike, first of all, the significant of the subpoenas to your parent company, explain it for us.

MIKE DORNING, CHICAGO TRIBUNE REPORTER: Well, one of the elements of the complaint is not the senate seat that everyone has been talking about. But actually the second element is this bizarre scheme allegedly in which Rod Blagojevich was trying to pressure the "Chicago Tribune" to fire some editorial writers who had been calling for his impeachment.

He was going to offer some inducements in financing that would help the parent company, Tribune Corp. sell off the Wrigley Field which the home to the Cubs. And that was going to help the sale of the Cubs along and he was essentially telling the Tribune Corp. you'll get this financial benefit allegedly if you fire these editorial writers I don't like.

SHUSTER: Mike, are you sensing that any of the supporters of Governor Blagojevich are now abandoning him? I mean, there has not been a peep from the governor? Reaction to all of these calls, all 50 Democratic Senators, you've got the move today for impeachment, the state Attorney General.

DORNING: Yes.

SHUSTER: Any word from, if not the governor, then maybe his best supporters?

DORNING: I haven't heard anything from them. I'm sure his wife is still a supporter. But there hasn't been a lot of talk from supporters.

SHUSTER: And so essentially he is all alone. He is completely alone right now in this, right?

DORNING: He is alone except for his very inner circle even one of his very close aides, John Wyma (ph), who is his chief of staff in Congress and that used to run with him every morning before work and he's known for years, turned on him and apparently may have worn a wire on him.

SHUSTER: And I guess, based on the way he has governed he has always had a very small, tight circle of advisers, not much contact with anybody else.

DORNING: As far as I know that's correct. I knew him better when he was in Congress and running for the governor initially. I've been based in Washington covering the Obama folks mostly. But that's my general sense of their operation.

SHUSTER: All right, "Chicago Tribune" reporter Mike Dorning. Mike thanks for joining us.

DORNING: Thank you.

SHUSTER: Over the last two days, the Blagojevich criminal complaint has been a fascinating and gripping must-read for journalists, pundits and politicians and those trying to decipher an alleged white collar criminal mind.

And you don't have to read very far in Blagojevich his own sense of grand jury, his disregard for subtlety or his view of those around him to wonder is the governor certifiably crazy?

A fellow Chicago Democrat once called the governor a madman and insane. A February Chicago magazine profile quoted people who knew the governor saying he was sociopathic. Others said it's a psychopathic personality disorder.

Well, that has the Chicago psychologists who think hot Rod's perpetually perfect blow dry hits at a narcissistic personality disorder. Quote, "It's part of the grandiosity, they are not going to be able to punish me. I'm above the law, I'm smarter, I'll outfox them."

So is there something clinically wrong with the governor who once boasted about his testicular virility after a public falling out with a father-in-law who ushered him in to politics.

Dr. Daniela Schreier is a clinical and forensic psychologist and assistant professor at the Chicago School of professional psychology and Dr. Larry Grimm, is an emeritus associate professor of psychology and director of graduate studies at the University of Illinois Chicago.

Dr. Schreier, it is one thing to sneaky about your corruption, what do you make of Blagojevich openly stating on conference calls that lasted two hours that he wants to cash in?

DR. DANIELA SCHREIER, CLINICAL PSYCHOLOGIST: Well, I think it's just another sign. I see that on several other interviews that he has kind of a white collar psychopath mind. And I think it just fits in with actually the stereotypes that we pointed out.

And I want it to make also sure-thanks for having me on the show first of all-if they are not talking about the governor, I never had a chance to speak to the governor or to assess him. We are talking just about the behaviors and actually what we hear about in the media about him.

SHUSTER: Oh, no worries, we are not wanting to suggest that you or Dr. Grimm have actually conducted any sort of assessment in person.

But Dr. Grimm, Blagojevich used the "F" word all the time. Here is the prosecutor Patrick Fitzgerald recounting some of the conversations Fitzgerald in a family friendly manner. Watch.

(BEGIN VIDEO CLIP)

PATRICK FITZGERALD, U.S. ATTORNEY: In the governor's words, quote, "Fire all those bleeping people, get them the bleep out of there, it is a bleeping valuable thing, I've got this thing and it's bleeping golden. And I'm just not giving it up for bleeping nothing." Those are his words. Not our characterization, other than with regards to the bleeps.

(END VIDEO CLIP)

SHUSTER: Dr. Grimm, what do you make of the profanity and how it fits in with the psychological profile?

DR. LARRY GRIMM, PROFESSOR OF PSYCHOLOGY UNIVERSITY OF ILLINOIS:

Well, I don't think that much can be made about cursing and any kind of psychiatric diagnosis. There are people who prefer to use that kind of language and others who don't.

It's really more of a moral issue. And some people who are very aggressive in their lifestyles tend to swear more. I wouldn't make too much out of that.

SHUSTER: All right, can we make anything of yesterday in the midst of all these people ignoring and abandoning governor Blagojevich, there he was, the cameras has captured him and he sort of waved as if he was at summer parade. No bothers in the world. Can we make anything of that?

GRIMM: Yes, I think we can. I think he's in a stage now where he is underestimating the gravitas of the situation, probably in some level of denial. And it certainly represents an extreme form of arrogance which is very characteristic of his behavior throughout this whole process.

SHUSTER: Well and on that arrogance, let's play the sound bite of Governor Blagojevich from Monday when he was hanging out with some city workers and was trying to show some solidarity with these factory workers. Watch this.

(BEGIN VIDEO CLIP)

GOV. ROD BLAGOJEVICH, (D) ILLINOIS: There's not enough sunshine hanging over me. Let me answer that. The true question is, and by the way, I should say, if anybody wants to tape my conversations, go right ahead. Feel free to do it. I appreciate anybody who wants to tape me openly and notoriously. And those who feel like they want to sneakily and wear taping devices I would remind them that it kind of smells like Nixon and Watergate.

But I don't care whether you tape me privately or publicly. I can now tell you that whatever I say is always lawful and the things I'm interested in doing are always lawful.

(END VIDEO CLIP)

SHUSTER: Daniela Schreier, what do you make of that sense of confidence that everything he's doing is lawful when all these conversations and all these witnesses presumably would say the exact contrary thing.

SCHREIER: Well, I think it plays exactly in the profile that we pointed out. For example, the sense of invulnerability, I am out there, no one can get me. And maybe this is what upset the public so much. That people yesterday went out and said well, there must be something wrong with him because it's kind of such a violation of social norms. Such his calmness, his lack of anxiety and actually the compulsive saying, I didn't do anything wrong.

I guess, this is why people came up with, oh my God, there must be something mentally wrong with the person. But it really underlines only the profile that we pointed out before.

SHUSTER: Well, are we crazy for suggesting that he's crazy?

SCHREIER: Well, I think what we are very leniently seeing we are all crazy. We all have personality traits; we have all things going on with us. But this does not fit into like is he mentally ill. He might meet some actually personality traits, some of the symptoms. But he does not meet a full-blown diagnosis, at least what we know by now.

And certainly this does not help him actually in the court of law to be qualified as mentally ill or not guilty due to mental unfitness. So yes, it would not be.

SHUSTER: Well, speaking of full blown. That reminds me of his full blown hair. And Dr. Grimm, this idea that because of the way he coifs his hair that that signals some sense of overconfidence. Is there anything to that?

GRIMM: No. There's nothing to that. I don't think that what we should do is pick out tiny little behaviors and blow them out of proportion into a psychiatric diagnosis.

And what you have to do when you characterize somebody especially if you're going to use a diagnostic term is you have to look at a broad pattern of behaviors, because personality disorders are defined by a confluence of a number of traits that hang together. So it's really a mistake to just pick out one tiny little thing and run with that. And we certainly have enough evidence.

SHUSTER: Sure enough, but as far as disorders, at least from a political perspective, when you look at a political team and certainly it seems like a disorder how isolated he was, say, I don't know from lieutenant governor, his lieutenant governor describing that. Watch.

(BEGIN VIDEO CLIP)

QUINN: I haven't spoken to the Governor really since the summer of 2007. I led an effort to try and put recall on the ballot as a constitutional amendment in Illinois and its widespread support.

UNIDENTIFIED FEMALE: Doesn't that seem strange here that the lieutenant governor's not speaking to the governor? That's certainly not the way business is normally done.

QUINN: Well, I tried to, I think lots of other political officials tried to; the governor is very isolated. That is one of the problems right now. But hopefully upon reflection, the governor will decide that the interest of the common good and the people of Illinois require that he step aside and resign from office.

(END VIDEO CLIP)

SHUSTER: Dr. Grimm, an isolated man who has not budged despite all the criticism, who thought he could get away with this, who didn't think anything wrong about going on a conference call with dozens of people and saying he wanted cash for the senate seat. Is this somebody who is psychologically fit to continue to governing?

GRIMM: I don't believe that he is psychologically fit because his judgment is so poor and it's a complete breakdown on leadership. And you can't be a leader unless you have people who are willing to follow and he has lost all political capital.

So for two reasons I don't believe that he is fit to govern. One, he has lost all his leadership capability and the other is that people have so many moral qualms about him that there is absolutely no trust between the governor and any of his constituents.

So he functionally is not able to lead at this point. Independent of whether he has a psychiatric diagnosis.

SHUSTER: Well I don't know too much about this psychiatric diagnosis but in terms of the politics, this is some of the most bizarre, crazy, political behavior I think I have ever seen and a for that reason, I'll agree with you.

Dr. Larry Grimm and Dr. Daniela Schreier, thank you both so much for coming out and we appreciate it.

GRIMM: It's nice to be here.

SHUSTER: From psycho analysis to political analysis, looking at the President-elect's honeymoon period. Voters are putting a ton of faith in Obama, will it help him weather this political storm surrounding the crazy Illinois Governor.

And before we do that, the other side of the dial, late-night comedians' take in the coverage of the Blagojevich indictment. You saw the first half as far as the top ten messages left on the Blagojevich's answering machine.

Here is David Letterman's top five.

(BEGIN VIDEO CLIP)

DAVID LETTERMAN, DAVID LETTERMAN SHOW ANCHOR: Number five, I'm calling about your Senate list on Craig's list. I want to trade for a Futon.

Number four, hey, it's Cheney. Damn, even I think you are sleazy.

Number three, you really Blagojeviched your political career.

Number two, I'm guessing you didn't spend the bribe money on that hair cut.

Number one message left on Rod Blagojevich's answering machine-it's Sarah Palin. Thanks for replacing me as the country's most embarrassing governor.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

SHUSTER: Welcome back.

Anyone who is married knows that the honeymoon is a time to kick back, bask in the glow of love and focus on the future. Obama is going through a political honeymoon following his election victory. And most Americans are still feeling the love for him in a big way.

A new poll out today from the Associated Press shows 73 percent including more than half of all Republicans say approve of how the president-elect is handling the transition while just 14 percent disapprove. In the latest NBC News/"The Wall Street Journal" poll found Obama's favorable versus unfavorable ratings is 67 percent to 16 percent.

By comparison, a month after President Bush's initial victory in 2000, his favorable/unfavorable was 48 percent to 35 president. While President Clinton's back in 1992 was 60 percent to 19 percent.

Obama's high scores combined with the fact that four out of every five Americans believe he will face bigger challenges than other recent presidents have could give Obama some leeway with the American public and it may help him side step potential controversies like the corruption scandal unfolding in his home state of Illinois.

Joining us now, Jonathan Alter, "Newsweek's" senior editor and columnist and an NBC News analyst and the author of "The Defining Moment:

FDR's 100 days and the triumph of hope" which Barack Obama was reading after his election day win.

Jonathan, how important are these numbers now for Obama in dealing with these unanswered questions that are floating out there from Illinois?

JONATHAN ALTER, NEWSWEEK: Well, you know, none of these numbers are particularly important because there is no election around the corner. But it does help to start your administration with healthy public support. And I think even if his numbers come down a little bit after all this bad publicity out of Illinois,' he will still go into the White House on January 20th with a pretty good wind at his back. Of course, that's assuming that there aren't some new revelations that are more damaging than what we've heard so far.

Fortunately for him he has not had a good relationship with Rod Blagojevich over the years. You know, he didn't support him when Blagojevich first ran for the senate in 2002 and Obama was a nobody; but he wasn't for him that year.

In 2006 when Blagojevich ran for re-election, Obama and the entire rest of the Chicago Democratic establishment did support him and did not put up anybody against him in the Democratic primary. I think that is something they are going to have to answer for a little because even then it was known in Blagojevich's first term that he was a bad actor, not somebody you wanted to be associated with.

But in terms of any of these, you know, corruption charges, it is right there on the tapes that Blagojevich is swearing about Obama and complaining that, you know, all he would get in return for picking his senate replacement was quote, "appreciation" which Blagojevich scoffed at and said he wanted something real, cash, money.

SHUSTER: Given that evidence it is still clear that whatever communication there was between Blagojevich and the Obama transition it was clear, at least to Blagojevich, that the Obama transition was not interested in the least in his sort of schemes or games.

So it seems to me that even if there are these conflicting statements from David Axelrod or the argument that perhaps Barack Obama could have had a much stronger statement when the story first broke than "I'm sad about it," it doesn't matter in the grand scheme of things because right now there is no indication the Obama team did anything wrong and there are still all these huge issues like the auto bailout, the falling economy, et cetera, et cetera.

ALTER: Absolutely. I don't think even David Axelrod did anything here that was wrong. When he realized he had misspoken, he corrected himself on the lack of contact between Blagojevich and Obama.

The other thing, David, is big things are happening on the transition everyday. For instance, today on health care policy, Obama announced that he considered doing something to reform the health care system, not something that should be delayed until after the economic emergency, but as part of the economic emergency, part of the problem that we are facing right now. And that suggests and this is very important, that they might move health care up on the calendar from late in the year to the beginning of the year and really take a big bite of the apple on major social policy in the early part of 2009.

SHUSTER: Jonathan Alter, "Newsweek" senior editor and columnist and an NBC News analyst and the author of "The Defining Moment: FDR's 100 days and the triumph of hope." Jonathan, thanks for coming on tonight.

ALTER: Thanks, David.

SHUSTER: Up next, will this man go down as the worst president in history? What voters predict President Bush's legacy will be; numbers from our new NBC News/"Wall Street Journal" when "1600" returns.

(COMMERCIAL BREAK)

SHUSTER: Welcome back.

Over the last month President Bush has appeared to do and say some of the right things in terms of helping president-elect Obama take over at 1600 Pennsylvania Avenue. He has met with Obama at the White House, kept Obama informed in key economic policy decisions and has urged outgoing White House staff to be as helpful as possible to the new team.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This peaceful transfer of power is one of the hallmarks of a true democracy. And ensuring that this transition is as smooth as possible is a priority for the rest of my presidency.

(END VIDEO CLIP)

SHUSTER: But despite the goodwill he is trying to show to the incoming Democratic president, George W. Bush simply cannot catch a break with much of the public. Outgoing presidents typically get a boost in their approval rating after an election, but President Bush's approval is still mired at just 27 percent according to the new NBC News/"Wall Street Journal" poll with 67 percent of voters saying they disapprove of the job he's doing.

Joining us now is Michael Beschloss, NBC News presidential historian and author of "Presidential Courage: Brave Leaders and How They Changed America, 1789 - 1989."

What do you make the president is not getting any benefit from anything he's doing right now?

MICHAEL BESCHLOSS, NBC NEWS PRESIDENTIAL HISTORIAN: Americans are pretty angry; we don't need to tell our viewers tonight. Two of the things that make Americans most angry at a president are an unpopular war and a big economic crisis. He has got both at the same time; that rarely happens. We are seeing those numbers.

SHUSTER: What are the historical analogies?

BESCHLOSS: Well, you know, usually when a president is in an economic crisis like this, Jimmy Carter had a good transition to Ronald Reagan; did everything that the Reagan people expected. But interest rates were 21 percent, people were out of work. They were very angry at Carter, so you have to assume that people feel the same way about George Bush.

SHUSTER: Is it fair to say that, at least right now, historians would predict that George W. Bush will go down as one of the worst presidents in U.S. history?

BESCHLOSS: I think they probably would refrain from predicting because the whole idea of having an historical judgment-we all have judgments of citizens and voters, but the definition of a historical judgment is that you waited a couple of decades to see things in a little bit of perspective and oftentimes it does change, sometimes for the worse.

Warren Harding when he left office in 1923 left office by dying, was one of the most popular presidents in history. People were tearing out their hair; what will we do without Harding. Yet, in history looking back, we say that his inaction had a lot to do with bringing on the Great Depression and also the rise even of Adolph Hitler.

SHUSTER: As a historian, what do you make of this sort of legacy tour that is being worked on now, some of the Bush team is trying to improve things as far as his legacy and talked to him and talked to some interviews and sort of change the way they have viewed things? As a historian, does that make any difference? Is it ever used?

BESCHLOSS: No. It doesn't. There is no harm and presidents tend to do this kind of thing. And people who want the best for their president, they suggest this. It is not going to have absolutely any affect on the future judgment of historians because what we do, as I say, we wait for a couple of decades to pass. We get in to the documents and the other sources that outsiders did not have at the time and then just line it all up and see how things look 20 or 30 years out.

It is nice if he wants to give a couple of interviews but my guess is it's not going to have too much effect on a judgment like that.

SHUSTER: The bottom line is that judgment will depend, I mean, if five years from now Iraq is a peaceful democracy, people will view the decision to go to war differently?

BESCHLOSS: He has got to hope that. He also has to hope that this economic crisis ends quickly and also that future historians don't blame him for it. That's a hope that we'll know more about 20 or 30 years from now. But if he wants to be seen as a president who is more popular with later generations than he is with current Americans, that's the kind of thing that's going to have to happen.

SHUSTER: Michael Beschloss, presidential historian, also with NBC News. Michael thanks for joining us.

BESCHLOSS: Great to see you, David.

SHUSTER: That's the view from "1600 PENNSYLVANIA AVENUE" tonight.

I'm David Schuster. Thank you for watching.

We will see you back here tomorrow night, same time 6:00 Eastern, right here on MSNBC.

"Hardball with Chris Matthews" is up next.

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

END

Copy: Content and programming copyright 2008 NBC. ALL RIGHTS RESERVED. Transcription Copyright 2008 ASC LLC ALL RIGHTS RESERVED. No license is granted to the user of this material other than for research. User may not reproduce or redistribute the material except for user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon NBC and ASC LLC's copyright or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.

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