updated 12/15/2008 4:43:46 PM ET 2008-12-15T21:43:46

Guest: Pat Buchanan, Lawrence O‘Donnell, John Harwood, Richard Wolffe, Steve Hildebrand, Dan Froomkin, Phil LeBeau, John Harwood, Mark Zandi, Pat Buchanan, Bob Shrum

NORAH O‘DONNELL, HOST:  Tonight, “I will be vindicated.”  Those are the words that fell from indicted Illinois Governor Rod Blagojevich‘s lips today just after he literally prayed with ministers before heading to the office.  Calls for his impeachment continue to intensify as questions continue to swirl around exactly who was involved in trying to sell the president-elect‘s vacant Senate seat. 

All that and more is coming up on 1600 PENNSYLVANIA AVENUE.

Thirty-nine days until the inauguration of President-elect Barack Obama. 

Welcome to the show.  I‘m Norah O‘Donnell. 

My headline tonight, “Collision Course.”  Detroit‘s big three may be headed down a collision course with bankruptcy after a $14 billion bailout proposal crashed and burned in the Senate last night. 

A marathon negotiating session ended in defeat after UAW workers refused Republican demands for swift wage cuts.  The repercussions were felt across the globe as world markets dropped this morning in fear that the U.S.  recession was about to worsen with an industry-wide collapse.  The Senates‘ failure to agree on the legislation has put the auto industry on a detour for the funds. 

A detour that leads them directly to 1600 PENNSYLVANIA AVENUE.

And under firm pressure from the big three, the Bush administration shifted its tone today, saying that it is now willing to weigh all options, including the use of funds such as TARP, the $700 billion Troubled Asset Relief Program, to help the industry stay on life support. 

In fact, a statement from White House spokesman Dana Perino today reads: “A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time.”

As we wait to see what the current president‘s decision will be, a senior administration official telling NBC News this afternoon, “We have some creative thinking to do.” 

The president-elect, Obama, expressed disappointment over the situation, saying this in a statement, “I share the frustration of so many about the decades of mismanagement in this industry that has helped deliver the current crisis.  My hope is that the administration and the Congress will still find a way to give the industry the temporary assistance it needs while demanding the long-term restructuring that is absolutely required.”

So, at this hour, the short-term and long-term fate of the U.S. auto industry continues to hang in the balance. 

Joining me now to weigh in on this and what is to come are Phil LeBeau, CNBC‘s auto industry reporter, and John Harwood, CNBC‘s chief Washington correspondent and political writer for “The New York Times.”

Welcome to you both. 

PHIL LEBEAU, CNBC:  Hi, Norah. 

O‘DONNELL:  Phil, let‘s start with you.  Where do we stand now? 

LEBEAU:  Well, the people in Detroit are optimistic.  Maybe “optimistic” is too strong a word—hopeful that something will be worked out with the Bush administration where the Treasury Department, either through the TARP fund or through some other creative means, maybe through the Federal Reserve, in some fashion, $14 billion is put out to General Motors and to Chrysler.  Four billion dollars to Chrysler, $10 billion to GM, to at least get them into February, into March.  And at that time, they essentially kick it ahead to the Obama administration, to the new Congress, when they can sit down and say, OK, let‘s get everybody together.  If we‘re going to help you guys out over the long term and it‘s going to take billions of dollars, we‘re going to restructure this company. 

But they‘re not going to hammer out a deal in a matter of hours.  And that was really why the UAW last night said, we‘re not making this deal.  We‘re not agreeing to something that we probably would not agree to if we were in bankruptcy court. 

O‘DONNELL:  Yes.  They believed that they were going to take it on the backs of these workers, any kind of deal.  And that‘s why they didn‘t like the deal. 

Amazing though, of course, what happened was the markets were way down across the globe.  And then this morning, before the opening bell on Wall Street, the White House, the Treasury Department says, we will help, we‘ll blink, we‘ll step in, we‘ll use some of these TARP funds. 

But I think here‘s really the catch.  Apparently, they‘ve already spent about $335 billion of the $350 billion that‘s already been approved.  If there is not enough money left, does this get delayed because the White House has to go back to Congress to get the other half of the money before the automakers?  So aren‘t we just back at step one again? 

LEBEAU:  Well, the interesting thing is, for the automakers—we‘re really talking just about GM and Chrysler.  There is a point where they will need actual funds to be delivered to them. 

They have suppliers now who are demanding cash on delivery.  They are cutting back to the bone in terms of their costs as much as possible. 

At some point—and they both have bankruptcy counsel now.  At some point they will have to make a decision. 

Now, I suspect that both companies, through their Washington groups, through lobbyists and their representatives in Washington, are making it clear to the Bush administration, to the Obama administration, here is the deadline.  Here is the date at which we cannot wait any longer, we will to have file for bankruptcy. 

They‘re not making that public because once you talk about going bankrupt in public, it hurts sales, hurts the residual value of vehicles.  But my guess is that this is likely going on behind the scenes. 

O‘DONNELL:  John Harwood is also with us with CNBC and “The New York Times.”

And John, we heard from the governor of Michigan, who today said those Republican senators who voted against this, scuttled this bill, are “un-American.”  There is a lot of emotion involved in this. 

JOHN HARWOOD, CNBC CHIEF WASHINGTON CORRESPONDENT:  A tremendous amount of emotion.  A lot of fear on all sides, really Norah. 

You have got on the one hand, the fear of politicians about voting for another bailout.  They think that‘s a toxic word after the vote to send $700 billion to Wall Street last year. 

But you‘ve also got this tremendous fear, and it‘s especially intense in the Midwest of the country, that the collapse of one or more of these companies would have ripple effects throughout the economy, affect perhaps two million jobs, and take an economic situation right now that is very perilous -- 5333,000 people lost their jobs in the United States just in November—and make it that much worse, which is why the administration has stepped up and said, we‘re shifting our position on the use of that financial bailout money.  We‘re going to look at it over the weekend. 

And I think as Phil LeBeau suggested, they‘re trying to figure out, assess the financial condition of these companies, figure out what is the minimal amount of money that they could get to, those big three auto companies, to tie them into 2009, specifically GM and Chrysler, and then kick it to the next Congress and the next administration? 

O‘DONNELL:  I don‘t know about you guys, I just think the thing is a mess.  And now that it‘s in the White House‘s court, the White House even said today they‘re not yet ready to say how they‘re going to do this, but they are saying that the car companies and the unions have to make “meaningful concessions.”

Phil, how is anybody going to get to a deal about these concessions?  They couldn‘t get to the deal in the Congress. 

LEBEAU:  Well, keep in mind, it was not as though they had a lot of time in Congress.  You had Senator Corker essentially come in with tougher restrictions and say this is what you‘re going to need to do.  What the unions would like to do and what the automakers would like to do is essentially have a bankruptcy judge, not a formal bankruptcy judge, but somebody who would act like one, to bring all the parties together, let‘s say, over the next two months.  And essentially give them a deadline. 

Say, listen, you have got until March 1st or April 1st, whatever it might be.  You have until this date to bring down the cost of this company for the long term, permanently.  And if you can‘t do it by then, good luck in bankruptcy court, because somebody will force you to do it then. 

I think if you‘ve got all of the parties together for the automakers, that‘s when we would likely see them say, OK, we will restructure our costs.  Frankly, what we saw from the Republicans was similar to that, but there was not all of the parties—they were all invited in to say you have to make the cuts that are going to be needed here. 

O‘DONNELL:  All right.  Phil LeBeau.

HARWOOD:  And Norah, let‘s not forget, they did get a deal between the White House and Democrats in the Congress.  And now if this is in the court...

LEBEAU:  Right.

HARWOOD:  ... of the administration itself, they can use the principles of that deal to justify the release of this money from the TARP. 

O‘DONNELL:  Great point. 

Phil LeBeau and John Harwood, thanks so much. 

And it was Republican Senator Bob Corker who led the charge against bailing out the big three U.S. automakers.  He held a news conference today where he said one of the main reasons he couldn‘t support the original rescue plan is because he believe the $14 billion would end up just being a down payment. 

(BEGIN VIDEO CLIP)

SEN. BOB CORKER ®, TENNESSEE:  If you all remember during testimony the other day in the Banking Committee, we had an economist in there—or maybe a rating agency guy who said that, if we began putting money in these companies, know that we‘re going to be talking about $75 billion to $125 billion. 

(END VIDEO CLIP)

O‘DONNELL:  That guy, that economist, was Dr. Mark Zandi, who advised John McCain‘s campaign and who also testified in support of the auto bailout earlier this month.  And Dr. Zandi joins me now.  He‘s also the chief economist at Moody‘s Economy.com. 

Dr. Zandi, good to see you.  Thanks so much for joining us. 

DR. MARK ZANDI, CHIEF ECONOMIST, MOODY‘S ECONOMY.COM:  Thanks for having me. 

O‘DONNELL:  Senator Corker was talking about this comment that you made on December 4th, when you testified before the Senate Banking Committee.  Let me play it for our viewers. 

(BEGIN VIDEO CLIP)

ZANDI:  Under the most likely outlook for the economy and auto industry, the $34 billion in loans requested by the big three will not be sufficient for them to avoid bankruptcy at some point in the next two years.  It would ultimately need, in my view, somewhere between $75 billion and $125 billion to avoid this fate. 

(END VIDEO CLIP)

O‘DONNELL:  You testified in favor of a bailout.  What are the consequences for the overall economy if this doesn‘t get done quickly by the White House? 

ZANDI:  I think it would be catastrophic.  I think they would go into bankruptcy, they would be liquidated, and we would have over a million job losses in early ‘09, at a time when the rest of the economy is sliding away. 

It would completely undermine any semblance of confidence that remains.  So I really don‘t think there is much of a choice.  I think they need to get that $14 billion so we buy some time to get into next year, and then really think with the long material viability and whether it makes sense for taxpayers to put more money into solving this problem. 

O‘DONNELL:  So address that concern by Corker.  I mean, I guess he‘s right. 

He says it is going to be just a down payment for more federal dollars. 

But maybe that‘s not a reason to oppose it, right? 

ZANDI:  Yes, he‘s right.  It‘s going to cost a lot more.  But the problem is, if you don‘t give them $14 billion now and get them into next year, it will cost taxpayers a lot more money because all those millions of people will be out of work, they won‘t be paying taxes, and of course they‘ll be demanding government services.  So the actual cost to taxpayers will be much, much greater than $14 billion. 

So if you look at it from purely a taxpayer perspective, and probably a good way of looking at it, this should be done.  The $14 billion should be given to them, but you have to go into it with your eyes open and realize that this is going to cost, in all likelihood, a lot more.  Or you can think about what else you might want to do.  Maybe at some point it makes sense for them to go into bankruptcy, but not now. 

O‘DONNELL:  Dr. Zandi, let me ask you about—of course, the Republican senators blame the unions for not making enough concessions.  Well, today the UAW president questioned the motives of the Republicans for opposing this bailout.  Let‘s listen. 

(BEGIN VIDEO CLIP)

RON GETTELFINGER, UAW PRESIDENT:  They thought perhaps they could have a twofer here maybe.  You know, pierce the heart of organized labor while representing the foreign brands. 

(END VIDEO CLIP)

O‘DONNELL:  What about that?  Were these Republican senators, do you think, trying to kill labor during this deal? 

ZANDI:  No, I don‘t think so.  But I don‘t think it‘s a fair thing to ask labor to give concessions without asking all the other stakeholders in the big three to give concessions at the same time. 

The big three have lots of creditors.  GM owes $60 billion in debt.  Those debt holders have to concede something. 

All the dealers, all the suppliers, everyone who has dealings with GM, Chrysler and Ford, are going to have to give up something.  To ask the UAW to do it without bringing it all together and putting it all together I think it is not fair and unreasonable.  And that‘s something that should be done next year, when everyone has a little bit more time to think about this a little bit more carefully. 

O‘DONNELL:  Dr. Zandi, can you address that criticism?  It seem like there was so much emotion, so much anger.  So difficult at getting to a deal on a bill for $14 billion.  And as the critics out there said, it was $14 billion for people who shower after work, blue collar workers.  But when it comes to people who shower before work, those white-collar workers, Wall Street, Congress had no problem signing off on $700 billion. 

ZANDI:  Well, you know, I think one of the reasons why the automakers and the UAW and everyone involved in this are getting put through the ringer is because I think Congress is frustrated with the way things have gone with that $700 billion.  That they don‘t feel like that has gotten enough oversight, that that money has been handled properly, that they really have all information they need.  And I think they feel like they could go back and really do that better. 

Unfortunately, you have to remember a month, six weeks ago, when that TARP was put together, the financial system was in complete disarray and they‘ve really had no time.  They had to work very quickly.  But now they have a little bit of time, and I think it‘s appropriate for them to really put everyone through the ringer.  If you want to go to the government and get help, you need to go through this process. 

O‘DONNELL:  But as you know, that means that the Treasury is probably going to have to go back to Congress for the second half of this money in order to approve the money for these automakers, because they‘ve already spent $335 billion of the $350 billion.  So we may be back where we started because Congress wants these restrictions on that money.  They want more oversight, right? 

ZANDI:  Yes.  Well, it‘s $335 billion spent of the $350 billion that‘s already been allocated to the Treasury.  So they can take the $15 billion that‘s left over and give that to GM and Chrysler. 

We get into the next administration, the Obama administration will go to Congress and say, this is what we want to do with the $350 billion that is remaining out of that $700 billion.  And that can include a wide range of things. 

Maybe more help for the automakers.  Maybe not.  Maybe a big foreclosure mitigation plan.  Maybe buying mortgage assets, which was the original intent of the plan. 

You know, I think we can use the $15 billion.  It‘s there to solve this problem into next year.  And then think about what to do next. 

O‘DONNELL:  Dr. Mark Zandi with Moody‘s. 

Great to have you on.  We greatly appreciate it. 

ZANDI:  Thank you.

O‘DONNELL:  And up next, more political fallout from the Blagojevich scandal.  Is the Obama team really doing effective damage control?  Chief of staff Rahm Emanuel says he is now getting death threats. 

1600 PENNSYLVANIA AVENUE continues right after this.

(COMMERCIAL BREAK)

O‘DONNELL:  Welcome back. 

Embattled Governor Rod Blagojevich was back at work today.  Can you believe it?  Even as the Illinois attorney general was calling for the state supreme court to strip him of his power.

But President-elect Obama‘s team is showing signs of strain from the scandal, while chief of staff Rahm Emanuel saying today that is getting death threats.  Emanuel is believed to be an unnamed adviser mentioned in the criminal complaint against Blagojevich, although he is not implicated in any wrongdoing. 

The Illinois congressman has been uncharacteristically silent since the news broke on Tuesday.  And it brings us to the question of whether the president-elect and his team are doing enough damage control. 

Joining me now, Pat Buchanan, former Reagan White House communications director and Nixon speechwriter and an MSNBC analyst, and Democratic strategist Bob Shrum. 

Great to see both of you.  Thanks so much for joining us. 

BOB SHRUM, DEMOCRATIC STRATEGIST:  Happy holidays.  Glad to be here.

PAT BUCHANAN, MSNBC POLITICAL ANALYST:  Thank you, Norah.

O‘DONNELL:  Bob, Rahm Emanuel apparently today invited an ABC cameraman in to use the bathroom in his house and told him that he‘s getting death threats over this.  Is he stonewalling the press?  I mean, should he come out and answer more questions, get it all out there today? 

SHRUM:  I think they will answer all the questions.  I think they‘re getting all the information about anybody who talked to anybody in the Blagojevich enterprise.  I think all of that will be put out there. 

I think the president-elect has said this is shameful.  He‘s condemned it.  He‘s called for the guy to resign.  He said he never had any contact with Blagojevich about this.

I predict that when we look back on this two months from now, we‘ll still be fascinated by the utter cupidity of Rod Blagojevich, but nobody will think that any serious person in the Obama campaign had anything to do with this. 

O‘DONNELL:  Pat, do you think that Obama walked way too far out on a limb yesterday when he said, I‘m confident that no one on my staff would be involved in any deal-making? 

BUCHANAN:  No, I think he ought to say that, because if somebody was, he‘ll say I was wrong and they‘ll be fired. 

But I disagree with Bob Shrum to this extent—I think there is a real cloud developing over the Obama team.  You‘ve got three top advisers, Valerie Jarrett, Axelrod, and Rahm Emanuel, whom you would think would be in touch or might be in touch with the governor about this, who is going to replace Barack Obama in the Senate. 

Rahm Emanuel will not talk to anybody.  He is stiffing everybody. 

Why?  You have got to ask yourself, why haven‘t they just come forward and say, yes, a number of us talked to the governor about this.  But no, we were not involved in any deal.  We would never be involved in any deal.  No deal, illicit deal, was offered to us, and we talked on the following days. 

You don‘t need 72 hours of dead silence to get this material together.  So

and I think Rahm Emanuel in particular, as the chief of staff, ,who apparently is “the adviser” on the tapes, why he doesn‘t come forward and clear his name instantly and be done with this, I don‘t understand. 

O‘DONNELL:  And Bob, let me read from Gene Robinson‘s column today about Obama‘s response.  He says, “Obama‘s response seems awfully coy.  It‘s obvious that the president-elect would have an interest in who was appointed to the Senate from his home state—for good reason.  For that matter, it would be unusual if the president-elect didn‘t have a preferred candidate.”

“The normal thing would be for Obama‘s staff to talk to Blagojevich‘s staff.  And unless prosecutors have asked him not to, I don‘t understand why Obama hasn‘t stated this simple fact.” 

So what about that, Bob? 

SHRUM:  Well, first, I think there was a real awareness, I suspect, on the part of the Obama team that Blagojevich was not your ordinary governor.  He might be a kind of ordinary Illinois governor because a lot of them have been indicted, but he is not your ordinary governor.  So I think they were probably careful about those contacts. 

Secondly, I have to say Pat always thinks there‘s a cloud forming over Barack Obama‘s head.  I think we ought to be a little bit fair here to Valerie Jarrett—there is no indication she did anything wrong—David Axelrod, who is one of the most honest people I know, and Rahm Emanuel, about whom we know nothing that would implicate him in any way.  And the U.S. attorney has not indicated that he‘s done anything wrong, and if you read those papers he didn‘t do anything wrong.

O‘DONNELL:  Well, let me both read you exactly—and pay very close attention to what Obama said yesterday.  He said, “I have not been contacted by federal authorities.  We have not been interviewed by them.”

Do you need me to say it again?  You get it?  “We have not been interviewed.”  “I have not been contacted.”

So that does not preclude that someone on his staff has in fact been contacted by the FBI.  Right? 

BUCHANAN:  And they‘re going to be contacted.  Look, this is—come on, Bob.  You cannot be that naive. 

SHRUM:  Pat, you never have thought I was naive.  You always think I‘m too liberal, not naive. 

BUCHANAN:  Let me speak here for a second. 

Do you really think that Valerie Jarrett and Axelrod and Rahm Emanuel, as sharp as they are, knowledgeable as they are, completely oblivious to the fact that the governor of Illinois is shopping around the Senate seat of Barack Obama, the next president of the United States?  I mean, the guy is talking on conference calls, making various demands. 

The question is, during these calls from Barack Obama‘s senior staff, did they, in effect, listen to one of these solicitations—look, I want to be in the cabinet—and did they say, we‘ll get back to you?  And then did they go in and contaminate the president-elect of the United States by saying, this is what this clown wants, we‘ve got to tell him no, and not report that to the U.S. attorney? 

But you don‘t have a U.S. attorney tell Rahm Emanuel, you can‘t talk to the press when he‘s going to be the chief of staff to the president of the United States.  You say, Mr. Fitzgerald, I understand your point, but I‘ve got a position here I‘m defending.

SHRUM:  Pat, you‘re living in...

O‘DONNELL:  And Bob, what...

SHRUM:  Go ahead.  I‘m sorry.

O‘DONNELL:  Bob, I‘ve got to play for both of you guys—I mean, you might have seen this morning—what Governor Rendell said on “MORNING JOE.”  I mean, essentially bashing the Obama team for their response. 

Let‘s listen. 

(BEGIN VIDEO CLIP)

GOV. ED RENDELL (D), PENNSYLVANIA:  The rule of thumb is, whatever you did, say it and get it over with.  Make it a one-day story as opposed to a three-week story. 

Does the senator from Illinois talk to the governor?  I talk to my senators, my Republican senator, my Democratic senator, five, six time a month.  We have to.  It‘s inherent in the job. 

Did Rahm Emanuel, who took Rod Blagojevich‘s seat in Congress, have contact with Rod Blagojevich?  Of course he did.  Now, they may have thought he was the craziest SOB in the world, but you still have to have contact with him. 

(END VIDEO CLIP)

O‘DONNELL:  So Bob, why is Rahm Emanuel avoiding the press?  Why doesn‘t he just come out and say, yeah, I talked to him a couple times.  It was nothing nefarious.  Wasn‘t involved in pay for play.  If you want all the dates, I‘ll get them to you.  No big whoop.

SHRUM:  You just said what‘s going to happen.  They‘re going to put out there what all of the contacts were and who was involved in the contacts. 

But Pat literally just sketched a fantasyland in which there was an illicit offer made to someone high in the Obama campaign.  And they contaminated the president-elect by telling him that?  That is contradicted in fact by what the U.S. attorney has said, and there is absolutely no proof of it. 

So we shouldn‘t smear people‘s reputations without evidence. 

BUCHANAN:  Nobody is being smeared.  Governor Rendell is exactly right.

I mean, let‘s take Rahm.  Why doesn‘t he come forward and say, I talked to the governor eight or 10 times?  I gave him...

(CROSSTALK)

SHRUM:  Eight or 10 times?  Pat, where did you get that number?  Is that how high you count? 

BUCHANAN:  Bob, it is hypothetical.  You can deal with this, Bob.  It‘s hypothetical.

SHRUM:  No, it‘s just made up. 

BUCHANAN:  Bob, look, circle the wagons, right. 

Here‘s the thing—why doesn‘t he come out and say, I talked to him, there was no offer made, I would have rejected it out of hand, and that‘s the situation?  Yes, I talked to him a number of times and that‘s all there is to it.  And the press would go away, for heaven‘s sakes.  Why hasn‘t he done it? 

SHRUM:  It‘s going to be done and we‘re going to look back on it, and this is going to look like an entirely media-driven story just like some of the other stories, Pat, that you predicted—we‘re going to derail Barack Obama when he was running for president.  You were wrong then.  You‘re wrong again. 

O‘DONNELL:  All right.  Shrum, Buchanan...

BUCHANAN:  This is unfolding already.  And you‘ve got a problem on your hands, and if you don‘t come out soon, your friends, they‘re going to have a worse problem. 

O‘DONNELL:  We got it. 

Shrum, Buchanan, I know you guys.  We‘ll see you again.  Got to move on. 

Up next, it is a turf war, literally, between the Bushes and the Obamas. 

And the Bushes are winning.  We‘re going to explain. 

Plus, what Colin Powell thinks of Governor Sarah Palin.  It‘s all coming up next in “The Briefing Room” when 1600 continues.

But first, the Blagojevich scandal is comedy gold.  Here‘s Jay Leno last night. 

(BEGIN VIDEO CLIP)

JAY LENO, THE TONIGHT SHOW WITH JAY LENO:  A very embarrassing moment at the Illinois State Capitol today.  Did you see this?  The governor attended the opening of the nativity scene, and when the three wise men showed up with gifts for the Baby Jesus, Governor Blagojevich demanded half the loot.  Yes.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

NORAH O‘DONNELL, MSNBC ANCHOR:  We‘re back with a look at what‘s going on inside “The Briefing Room.”

It looks like the Obamas will have to turn to plan B for temporary housing before they can move into the White House.  They were hoping they would be able to move into the Blair house a little early so that Sasha and Malia could start school with their new classmates on January 5.

But the White House said, “Sorry no can do.  The Blair house is where incoming Presidents usually stay in the days leading up to the inauguration.  Well, the White House said it will be available for the Obama‘s but only starting on January 15th.

Until then, according to White House officials, the Bush administration will be using the home for events and host its open guests.  The Obama‘s are now considering other housing options and are hoping the girls won‘t have to miss the start of school.

And we have a quick programming note for all of you.  Be sure to watch the debut of “Meet the Press” with David Gregory this Sunday.  David will talk about the troubled economy and the auto bailout with Michigan governor Jennifer Granholm and former Massachusetts Governor Mitt Romney.

And up next the auto bailout crashes in Congress.  Is it a cautionary tale for President-elect Obama and the fate of his agenda?  We‘ll talk about that when “1600” returns right after this.

(COMMERCIAL BREAK)

O‘DONNELL:  Tonight the fate of U.S. auto makers is in the White House‘s court after the Senate Republicans derailed the rescue package.  What will President Bush do and is the fight teaching Republicans how to stop President Obama‘s agenda once he takes over at 1600 Pennsylvania Avenue.

Welcome back to “1600 PENNSYLVANIA AVENUE.”  On the other side of Pennsylvania Avenue today, lawmaker spent the day playing the blame game over the late night crash of the auto bailout after Republican Senators rallied against it.

So where does that leave the rescue package?  Right back where it started -

with the TARP Fund known to taxpayers as the $700 billion bank bailout. 

That‘s where the Democrats originally wanted the auto bailout money to come from.  An idea the Bush administration initially rejected.

But late this afternoon, Banking Committee Chairman, Chris Dodd said he is confident President Bush will change his mind.

(BEGIN VIDEO CLIP)

SEN. CHRISTOPHER DODD, (D) BANKING COMMITTEE CHAIRMAN:  So I‘m encouraged on this Friday afternoon that at some point, today or over the weekend, the White House will announce a course of action that will avoid the kind of catastrophe that all of us are worried about.

And that anybody that spent any time looking at this industry believes is the least attractive alternative.  And that is even a pre-planned or pre-packaged as they call it, bankruptcy and Chapter 11.  So I‘m hopeful that will be the case.

(END VIDEO CLIP)

O‘DONNELL:  Let‘s bring in our panel.  John Harwood, CNBC‘s chief Washington correspondent and political writer for the New York Times, and three of our MSNBC political analysts made it here on Friday afternoon.  Richard Wolffe, “Newsweek” senior White House correspondent, Pat Buchanan, former Reagan White House communications director and Nixon speech writer and in a box of his own, Lawrence O‘Donnell, former chief of staff to the Senate Finance Committee.  Great to have all of you.

Pat, any question that this White House is going to be able to work this out?  Get the auto makers to come up with some concessions so that they can get this money and get it passed?

PAT BUCHANAN, MSNBC POLITICAL ANALYST:  No and I think the White House is doing the right thing.  $14 billion is two percent of the $700 billion bailout the Congress voted.  And frankly, I think the Toyota Republicans of the south who got all those auto plants down there are very fortunate the President is going to rescue GM.  Because if the Republican Party were responsible for the death or for the lack of a reprieve for General Motors and it went under on their watch and because of what they did, I think they would really pay a long term price.  I mean, manufacturing is the heart of the nation, the sinew of the nation.  And to give up the auto industry I think would be a disaster.

Lawrence, we heard from the UAW and their president, Mr. Gettelfinger today who said, this was an anti-union, anti-Detroit crowd.  The Governor of Michigan said they were un-American these Republicans Senators.  Was this what Corker and some of the other Republican Senators were doing?  Was this an effort to try and break the unions?

LAWRENCE O‘DONNELL, MSNBC POLITICAL ANALYST:  Well, you know, in doesn‘t have to be seen that way in the sense that they knew that there was this fallback position and the only person standing in the way of using the TARP funds was the President of the United States who was lobbying very, very hard to get Republican votes to come over to this other position.

And so they knew that they could vote against this and that it wouldn‘t be catastrophic.  That there was another move to make and that all the pressure would then be on the outgoing President of the United States to decide whether or not to use TARP funds.  That decision has become fairly easy, it seems, in the last 24 hours.

O‘DONNELL:  John, if that money comes out of TARP, what happens to the car czar?  I mean, everyone is keep making fun of this czar that is now going to be at the White House because essentially we are nationalizing our auto companies.  What kind of concessions can they get now even if they had trouble getting those concessions with Congress?

JOHN HARWOOD, THE NEW YORK TIMES:  Well, I think at this point, the automakers are desperate enough for that money that they‘ll probably agree to anything the administration says.  But this is—

O‘DONNELL:  But will the unions?

HARWOOD:  Well, the unions have already agreed to go up, to step up to the plate with other stakeholders and sacrifice.  That was part of the deal that was cut between the White House and the Democrats in Congress.  The problem was that Republicans, who as Lawrence and Pat were both saying, had a free vote here to oppose this were trying to get them to agree to specific conditions by a specific date.  And the unions are saying that you‘re singling us out.  But clearly the administration does not want this, as Pat suggested, this industry to go down on his watch.  And they‘re likely to act.

O‘DONNELL:  Richard, I want to read you something interesting that was in first read, of course.  “Sure the numbers are closer now than they will in a month but Mitch McConnell is proving to be a pretty smart minority leader, while Harry Reid continues to get frustrated again.  And the lesson the Senate GOP caucus is going to learn from this fight is that by sticking together they can hold up Obama‘s agenda.”

Did the Republican Party learn something?

RICHARD WOLFFE, NEWSWEEK:  Sure, they did.  But the problem is, how close are the Democrats to that all important 60 number?  I mean, you can understand why the Obama team want to wait to see what kind of Congress they had to deal with.

And therefore, deal with any political fallout or benefits that they can get from their own package that they can bring in, in January.  The problem is the cash flow timetable is not the same as the political timetable.

So can they really sit this one out?  I‘m that sure that they can.  People to have to intervene now because there may not be a GM and a Chrysler to rescue in January.

HARWOOD:  A lot easier for Mitch McConnell to hold his troops together and block the Democratic agenda when he‘s got 49 votes—

BUCHANAN:  Right.

HARWOOD:  So when he‘s got 41 or 42.

O‘DONNELL:  Yes good point.  And Lawrence, is President-elect Obama feeling like the luckiest man in the world that he is not President today?  That he has at least a month left?

L. O‘DONNELL:  Well, this is a headache he doesn‘t need.  Let‘s remember, this is turning out the way the Democrats want it to turn out.  The money is coming out of the TARP funds.  You can describe this as a win for Democrats.  They went through the motions that they could in the Congress to see if they could get it done this other way that the President wanted to do it.  That didn‘t work defeated by the President‘s party.  And now it‘s going to be done the way the Democrats want to do it.

BUCHANAN:  If President Obama were in office and he got 58 Democratic votes to save General Motors and 42 Republicans filibustered to kill the biggest auto company in the United States, I don‘t think that would be good news for GM and it certainly wouldn‘t be good news for the Republican Party.

I think they would have no future at all in the industrial Middle West or among manufacturing workers in this country if they did a thing like that.

O‘DONNELL:  All right, thanks to all of you guys.

And up next, Obama‘s deputy campaign manager Steve Hildebrand on what liberal supporters can expect from the new President.

But first, John McCain stopped by David Letterman‘s show last night and had some fun with the Governor Blagojevich scandal.

(BEGIN VIDEO CLIP)

DAVID LETTERMAN, DAVID LETTERMAN HOST:  So when you go from going 1,000 miles an hour to a much slower pace.

SEN. JOHN MCCAIN, ® ARIZONA:  I don‘t want to talk about the bleeping campaign.  Do you understand?  If you think I‘m going to go back to that bleeping situation, then bleep you.

LETTERMAN:  Ok, thank—whoa.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

O‘DONNELL:  Welcome back to “1600.”

There‘s a story line that says some liberals become progressively more dissatisfied as Obama makes his cabinet choices.  The louder the modest praise has been from conservatives for national security and economic team picks they call centrist, the more restless this group of supporters has become.  President-elect Barack Obama‘s former deputy campaign manager Steve Hildebrand set up a firestorm recently among progressives when he wrote a memo responding to these critics and defending Obama‘s appointment.

Here‘s what he wrote: “This is not a time for the left wing of our Party to draw conclusions about the Cabinet and White House appointments that President-Elect Obama is making.  Some believe the appointments generally aren‘t progressive enough.  Having worked with former Senator Obama for the last two years, I can tell you, that isn‘t the way he things and it‘s not likely the way he will lead.”

Joining us now, Steve Hildebrand, President-elect Obama‘s former deputy campaign manager.  Steve, good to see you.  Thanks so much you for joining us.

STEVE HILDEBRAND, BARACK OBAMA‘S FORMER DEPUTY CAMPAIGN MANAGER:  Thank you

Norah.

O‘DONNELL:  You‘ve gotten a lot of criticism.  I want to read what Jane Hampshire wrote on her blog firedog.com.

She writes:  “After the past eight years, it‘s a bit much to stomach someone saying ‘just shut up and trust me, because I know better.‘  There is a lot of speculation right now about what will happen with the 13 million member email list the Obama campaign built, and there is some talk of Hildebrand running an organization that manages this.  I wonder how long those membership numbers will hold up when any criticism of Obama is greeted with patronizing lectures and sneering condescension for its liberals?”

Wow, Steve, patronizing lectures.  Is that what you were giving?

HILDEBRAND:  Look, I didn‘t tell anybody to shut up.  That‘s not the way my mother raised me.  What I was trying to do, Norah, is pretty simple.  We‘re at a time in this country where we‘re facing some of the most difficult and challenging problems that we‘ve ever faced: an economy that is in shambles; people out of work; people losing their homes.  We‘ve got a war in Iraq we can‘t forget about.  We need to bring our troops home.  We have climate change happening, that if we don‘t deal with, we‘re going to see repercussions for the rest of our lives and generations to come.

There is a lot on the plate for this new administration and for this Congress.  My biggest point in my column that I wrote for “Huffington Post” was to say, as Americans—not as liberals, not as conservatives or centrists—but as Americans, we should come together to solve these big problems.  That‘s what I was trying to say.  I was not trying to tell anybody to keep their mouth shut or not be critical.

It‘s time to come together.

O‘DONNELL:  Steve, have you felt a big back lash since the election?  I know that, for instance, there are different interest groups that have spent time at transition headquarters to make sure that their interests are represented; there have been long meetings to make sure everybody keeps happy.  Just how much of a back lash do you think there‘s been on the Web?  Or do you think this is overblown?

HILDEBRAND:  Well, this morning I believe on “Morning Joe,” you guys showed up (audio gap) of the people of this country.

O‘DONNEL:  And we just lost—go ahead.  Sorry. 

HILDEBRAND:  On “Morning Joe” this morning, I believe it was, you guys showed that a Pew research poll that could—I‘m good?

O‘DONNE:  Yes.  I can hear you, Steve.  Go ahead.  There was just a blip on the satellite feed.

HILDEBRAND:  I apologize.  I‘m not sure what happened. 

I believe this morning, I think it was on “Morning Joe” here on your station that had a Pew research poll that showed there is very, very little dissatisfaction in the Democratic party.  I believe it was four percent.

I think an absolute majority of the people in this country, a vast majority of people in this country really want to see this administration succeed.  Because when this administration succeeds, the American people are going to succeed especially those people that are hurting the most.

O‘DONNELL:  Steve, what are you going to do with that 13 million member e-mail list?  And how will you use that list to sort of rally those supporters around Obama‘s policy ideas?

HILDEBRAND:  Well, first of all, it is important to point out the blogger that you read from indicated that I might be running that new organization which is not the case.  I certainly want to be involved.  I think really what President-elect Obama wants to do is make sure that the voices of the American people are stronger than the corporate lobbyists on K Street in Washington.  That he ran with a sense that he wanted to get the American people involved in helping shape policy that helps them and affects their lives and doesn‘t benefit just the lobbyists that are being hired in Washington.

So I think it is really utilizing that list to generate a lot of support.  To put pressure on Republicans and Democrats alike to make sure that we can get thing done in Washington that help people back in America, not just in Washington. 

O‘DONNELL:  Steve Hildebrand, the former deputy campaign manager for the Obama-Biden campaign.  Nice to see you, Steve.  Thanks so much.

HILDEBRAND:  Thank you Norah.

O‘DONNELL:  Up next, constructing his legacy.  President Bush‘s team highlights what they consider the greatest accomplishments of his eight years in office.  You‘ll want to hear this.  What‘s on his legacy talking points list?  We‘re going to show it to you.  We‘ve got it for you.  When “1600” returns.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES:  To those of you who aren‘t sure exactly what come next, I know how you feel.  As our days in the White House wind down, we‘re going through a series of lasts.  Pardoned my last Thanksgiving turkey.  Laura decorated for her last Christmas in the White House.  And Barney bit his last reporter.  At least that‘s what we hope.

(END VIDEO CLIP)

O‘DONNELL:  Welcome back to “1600 PENNSYLVANIA AVENUE.”

In another last today, George W. Bush headed to Texas A&M to give his final commencement address as president.  And with preparations underway for his successor‘s inaugural, the president has been on a farewell tour of sorts, giving a series of speech that put a positive spin on his record from the Middle East—

(BEGIN VIDEO CLIP)

BUSH:  The Middle East in 2008 is a freer, more hopeful, and more promising place than it was in 2001.

(END VIDEO CLIP)

O‘DONNELL:  -- and even to the war on drugs. 

(BEGIN VIDEO CLIP)

BUSH:  And we‘re making progress.  No question, there is still work to do in America but we are making progress.

(END VIDEO CLIP)

O‘DONNELL:  And to counter terrorism, this week the White House sent a two-page memo which suggested talking points to highlight administration successes.

With me now to talk about President Bush‘s final days, Dan Froomkin, he writes the White House Watch column for Washingtonpost.com.  Dan, thanks so much for joining us.

DAN FROOMKIN, WASHINGTONPOST.COM:  Great to be here, Norah.

O‘DONNELL:  What is this?  Is this part of a coordinated strategy to try and spin the past eight years of Bush‘s presidency?

FROOMKIN:  Yes.  Who thinks it‘s going to work?  You look at the guy.  It looks like he‘s on top of the world.  It looks like he‘s celebrating the end of a tremendously successful presidency.

What is fascinating to me is the incredible disconnect with reality here.  You‘ve covered the president a lot.  That you know sometimes he operates in a bit of a bubble.  But this is extraordinary.  He is looking like he has been the greatest president ever and the reality is that the American public has turned profoundly against him.

O‘DONNELL:  Oh, yes.  NBC News/”Wall Street Journal” poll suggests the American people cannot wait until Bush is out of office.  Bush had some advice for some of these graduates at Texas A&M.  I want to play that for you and talk about it.

(BEGIN VIDEO CLIP)

BUSH:  Remember that popularity is as fleeting as the Texas wind.  Character and conscience are as sturdy as the oaks on this campus.  If you go home tonight and look in the mirror and be satisfied that you have done what is right, you will pass the only test that matters.

(END VIDEO CLIP)

O‘DONNELL:  I can‘t help but think that sounds a little like Stewart Smiley.  He‘s saying that popularity is fleeting.  He knows that because his popularity is in the tank now.

FROOMKIN:  It‘s a fascinating sound bite when you think about because what he‘s saying is, I look in the mirror and I think I did what was right.  That‘s good enough.  Well, it is good enough for a lot of us but for the President of the United States, at some point the question is, does the country think that you did the right thing?

On some of the key issues of the day, Iraq and Afghanistan and the economy and Katrina, the president has failed any test that doesn‘t involve a mirror.

O‘DONNELL:  Karl Rove and Karen Hughes, his long time advisers no longer in the White House, are apparently leading this effort a series of interviews and other thing to try and craft this image of Bush.  Can they make it work?

FROOMKIN:  I really don‘t think so.  I think the American public has turned the corner.  I think, if you talk to folks, what you hear is that Obama can‘t come fast enough.  As you said that poll, 18 percent of Americans say they‘ll miss hill.  The rest of them won‘t.

O‘DONNELL:  All right, Dan Froomkin with the Washington Post.  Great to see you.  Thanks so much.  We appreciate it.

FROOMKIN:  Nice to be here.

O‘DONNELL:  That‘s the view from “1600 PENNSYLVANIA AVENUE” tonight.  I‘m Norah O‘Donnell.  Thanks so much for watching.  I hope you have a good weekend.

We‘ll see you back here Monday night, same time, 6:00 p.m. Eastern on MSNBC.  Have a good one.

“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.

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