updated 12/18/2008 4:37:03 PM ET 2008-12-18T21:37:03

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

Guests: Kent Jones, Ron Suskind, Scott Turow, David Sirota, Francesca Grifo

RACHEL MADDOW, HOST: Well, the "Chicago Sun-Times" columnist is saying it was Rahm Emanuel 21 times on those tapes but we don't know if he was just, you know, calling to say hey. We don't have any idea if there's anything damning about those appearances. We don't even necessarily know what those calls were about. I think this is a headline that looks a lot more exciting than the story.

KEITH OLBERMANN, "COUNTDOWN" HOST: And we actually based even on the way the guy has phrased it. You and I know this from writing stuff ourselves, to phrase it the way he did, he doesn't know whether or not there are 21 phone calls, let alone what the import or impact are.

MADDOW: Yes, we-all we know is what one columnist says about surfacing on tape that we have not heard.

OLBERMANN: Yes, all right.

MADDOW: So, yes, we'll see.

OLBERMANN: So, the shoe is on the other foot. Go ahead.

(LAUGHTER)

MADDOW: Better there than on my forehead. Thank you, Keith.

And thank you at home for staying with us for the next hour. Tonight, we fight that queasy feeling that Rod Blagojevich actually might be able to beat this rap. While we wait for a new senator from Illinois, we look for more maddening loopholes in George Bush and Henry Paulson's economic rescue for Wall Street.

And we check in on news from the Department of Interior where snorting myth of Toaster Robbins (ph), and sleeping with oil company executives is all in the day's work.

But first, it isn't often that a news headline has the ability to stop you in your tracks. Drop your jaw and leave you speechless. And, I mean, legitimate headlines, not "Guy Makes Big Money off YouTube" headlines like CNN.com will happily put on a t-shirt for you. Today, we got one of these, for real, jaw-dropping headlines, "U.S. Vice President Admits to War Crime." Can you say bombshell?

In his latest legacy-polishing exit interview, Vice President Dick Cheney acknowledged for the first time, without trepidation or apparent fear of prosecution that he authorized torture techniques to be used against prisoners. He was asked and answered specifically about waterboarding.

Waterboarding, you may recall, from the Tokyo trials after World War II, when an international coalition, including us, convened to prosecute the Japanese officials and military personnel accused of war crimes including waterboarding. A number of those found guilty of waterboarding, American troops and allied troops and civilians. People found guilty of waterboarding those folks were sentenced to death and hanged. We hanged people for waterboarding as a war crime, in Dick Cheney's lifetime. With that is as the historical context, the vice president cavalierly told ABC News that he specifically approved that same technique being used against the prisoner named Khalid Sheikh Mohammad.

(BEGIN VIDEO CLIP, ABC NEWS)

JONATHAN KARL, ABC NEWS: Did you authorize the tactics that were used against Khalid Sheikh Mohammad?

VICE PRESIDENT DICK CHENEY, UNITED STATES: I was aware of the program, certainly, and involved in helping get the process cleared, that is, the agency, in effect, came in and wanted to know what they could and couldn't do. And they talked to me, as well others, to explain what they wanted to do and I supported it.

KARL: And on KSM, one of those tactics, of course, wildly reported was waterboarding, and that seems to be a tactic we no longer used. Even that, you think, was appropriate?

CHENEY: I do.

(END VIDEO CLIP)

MADDOW: Well knock me over with a feather duster. It appears that the sitting vice president of the United States just admitted to approving a practice that was once punishable by death by our country. The "I approve waterboarding and I'd do it again" admission came during another one of this victory lap interviews from President Bush and Vice President Cheney in their remaining 30-plus days on the job.

Later in the same interview, Cheney said of his so-called "enhanced interrogation technique program," he said this, quote, "It's been a remarkably successful effort. I think the results speak for themselves."

So that would be results like catching Osama bin Laden, catching the number two guy in al Qaeda, Ayman al-Zawahiri? And the head guy in the Taliban, Mullah Omar? Results like wiping out al Qaeda? Like wiping out the Taliban? Like turning the Muslim world towards moderation and against extremism? Because it would be awful if he we had results like that. Instead, we had the prosecution of Osama bin Laden's chauffeur.

We've had 14,000 terrorism deaths worldwide last year. We've had a four-fold increase of worldwide deaths due to terrorism in the eight years before that.

Asked by ABC if he has any regrets, the vice president said, quote, "Oh, not a lot at this stage." Asked about the offshore prison at Guantanamo Bay or the Red Cross found U.S. personnel using tactics that they described as tantamount to torture, the vice president says he is a man who likes what he sees there.

(BEGIN AUDIO CLIP)

CHENEY: I think Guantanamo has been very well run. Guantanamo has been very, very valuable, and I think they'll discover that trying to close it is a very hard proposition.

(END AUDIO CLIP)

MADDOW: A very hard proposition. The Bush administration does appear to be making it as hard as possible for anybody to close Guantanamo down. But I say, don't hold your breath, Mr. Vice President. I think you'll find that everything you have done can be undone, except, maybe, the bringing back to life of the people, the tens of thousands of people who have died in Iraq.

(BEGIN VIDEO CLIP, ABC NEWS, MONDAY)

CHENEY: I think the-as I look at the intelligence with respect to Iraq, what they found was that Saddam Hussein still had the capability do produce weapons of mass destruction.

(END VIDEO CLIP)

CHENEY: That is so not what they found. That's actually the opposite of what they found. The Iraq study group in 2004 found that Saddam Hussein had the desire for weapons of mass destruction but not the capacity. Not, not the capacity.

(BEGIN VIDEO CLIP)

CHENEY: What they found was that Saddam Hussein still had the capability to produce weapons of mass destruction.

(END VIDEO CLIP)

MADDOW: No, no, no. No, no. Not, not at all what they found, actually. Totally wrong about that one.

The White House is actively trying to sell us the war in Iraq again, now, against all the widely known fact-based nearly universally accepted cases against it. A wise man once said, "Fool me once, shame on you. Fool me-you can't get fooled again."

(BEGIN VIDEO CLIP, SEPTEMBER 17, 2002)

PRES. GEORGE W. BUSH, UNITED STATES: Fool me once, shame on-shame on you. Fool me-you can't get fooled again.

(END VIDEO CLIP)

MADDOW: You can't get fooled again, right? Right?

So, here's the political question-for these last 35 days or so of the Bush administration, why is there seemingly no pushback against the revisionist history that is being pumped out of the White House right now? If a person drinks and drives and crashes into your living room, the rest of us with the government as our proxy, take that person's keys away. You did a very bad thing. You're no longer allowed the chance to do that again. In this case, Bush and Cheney are still drunk, still in that car, still sitting in the rubble of our living room, revving the engine, and asking if we want to go for another spin around the block with them.

The public has actually spoken here and the most effective way that we can. The 2006 midterm elections and the 2008 presidential elections-two elections, two Democratic, anti-Bush landslides. The verdict from the public is in. We've got a new president-elect who was against the Iraq war from the get-go and says he will close Guantanamo and he's unequivocally against torture.

And a new "Washington Post" poll shows 70 percent of Americans support Obama's plan to get out of Iraq in 16 months, 70 percent. The world now sees us as a disaster. The guy who threw a shoe at our current president is being hailed as a hero in much of the world. An overwhelming majority of Americans have come to agree that the past eight years of American foreign policy, if nothing else, were just unacceptable.

And we're working on the future of the country, which hopefully we're always doing. And we're scouring our own history for good and bad examples of how to act. One might hope that a near universal consensus against some bad idea, like drunk driving or invading Iraq, would consign an idea like that to the big circular file of American history marked "waste," the proverbial dust bin of history.

Just as an example, the U.S. government apologized for the illegal interment of Japanese citizens that took place after Pearl Harbor. Reparations were paid to those who were interred. That is for the history books judgment rendered that is intended to leave no ambiguity. No doubt for future generations. What went on here was wrong. Don't do it again. Anybody proposes doing something like this again-laugh them out of the room.

So, instead of just glossing over the vice president's war crime's admission on ABC News, should something be done here? Is it possible that some of the many public officials elected as a rebuke to Bush and Cheney could do something official? As a statement for the record? Just for future reference?

Joining us now is Pulitzer Prize-winning author and journalist, Ron Suskind. He has written three bestselling books on the Bush administration.

Mr. Suskind, thanks very much for being back on the show with us tonight.

RON SUSKIND, "THE WAY OF THE WORLD" AUTHOR: My pleasure.

MADDOW: You have written a number of books about the inner workings of the Bush administration, specifically, you detailed their decision to invade Iraq. Is Dick Cheney making the same case for invading Iraq now that he did then?

SUSKIND: Well, not really. You know, it's interesting. Think about this case back then. Think about Dick Cheney saying, now, back in 2003, this pitch.

The president gets up for the State of the Union Address a few months before the Iraq invasion and says, "Listen, Saddam Hussein may, someday, want to get his hands on weapons of mass destruction and who knows what he'll do with them. Based on that we're going to invade Iraq and own that country." I mean, folks at that the point would have said, frankly, Rachel, "You've got to be kidding."

At this point, we're fighting Islamic radicals from around the world.

We have finished business in Afghanistan. Pakistan, of course, is a mess. You know, that would have an actual conversation. What's interesting here is that when you look at the broad context, which is something we should be doing at the end of the presidency, we say, first off, we have the extraordinary instance of a war of choice, almost unheard of in American history, and a case where the choice itself, was never offered to the American people, a kind of compounding.

And right now, I think it's fascinating you've got Dick Cheney, actually, oddly, embracing the truth at the very end, even while the president and Karl Rove and others are sticking to the old, torn, and worn-out script.

MADDOW: It is-I think it is significant and interesting that Karl Rove is saying essentially that the war was a mistake with different intelligence about WMD. I wonder how that intelligence got screwed up. He's saying we wouldn't have gone. But now, the vice president is saying, "Ah, who cares about the intelligence? We are glad we went," looking back at it.

SUSKIND: Exactly. You know, what's really interesting here, the historical record is actually, fairly clear now. What is absolutely indisputable is, (A), from the very first National Security Council meeting of this presidency in January of 2001, it was all about how to remove Saddam Hussein and own the country. Not about why or whether. It was about how to do it, all logistic, how to justify the war.

Beyond that, what's also clear is that, through 2002 and the fall of '02, and early 2003, we had both the Iraqi foreign minister and the head of intelligence in secret back-channel meetings, telling us there are no WMD. Let us prove it to you.

Beyond that, fascinating, Iraq intelligence chief, as I pointed out in my last book, told us, here's what Saddam Hussein is actually thinking. He's afraid of the Iranians. That's why he doesn't want to show the world he has no WMD. All of this was clear to the White House prior to the invasion.

And what the vice president is now saying quite clearly, "None of that mattered. We were going in anyway." There was never really trust or any actual veracity in a case for war. It was a matter of simply selling it like a bar of soap, and now, well, here's the truth. It didn't matter that he didn't have weapons of mass destruction. We basically said he's got to go. And we carried through implementation.

MADDOW: The vice president is now, also, because of this last interview, on record admitting to having authorized waterboarding. He obviously thinks that it is legal and as you helped document, the Bush administration took great pains to make it seem sort of legal. But is it -I mean, couldn't that very easily be tested if war crimes charges were brought?

SUSKIND: Absolutely. You know, let's again be clear as to what's just occurring. The president and Karl are sticking to script. Cheney, maybe he's thinking of his own legacy is saying, "Fine, most people believe this stuff anyway. Come at me. Here's what we did. Yes, waterboarding was something that we saw, we thought through, we approved at the highest levels. It is indisputably torture."

What does that mean? The United States approves torture. The White House of the United States cleared, checked the box, and said, "Full steam ahead."

Now, what's important here, is that this coming out at the end of so-called "operational time," the president is still in office, provides an opportunity, historically-speaking, to have an actual debate as to the course of the shape of state. That's the way democracies are really supposed to work.

The self-correcting prophecies in a democracy, that's the brilliance, Rachel, of what makes democracy so special. That in actual sorts of present tense, you are going to correct, when something's gone wrong or at least begin the process of saying, "Hey, look, this is an unfinished experiment in democracy here in America. We're doing, frankly, our best toward a more perfect union. This is what we do here. We go right at these issues."

And in a way, the vice president is opening the gates for that. Let's see what happens.

MADDOW: Yes. The key, though, is that the correction actually happens. And people pushed for it.

Ron Suskind, Pulitzer Prize-winning author and journalist, thank you very much for you time tonight, sir. It's always nice to have you on the show.

SUSKIND: My pleasure.

MADDOW: I should mention that Mr. Suskind's latest book is called "The Way of The World."

All right. So, it's only a matter of time before Rod Blagojevich goes down, legally, right? Not so fast actually. The Illinois State Assembly committee that was working on the impeachment process, they decided to slow themselves down today after Patrick Fitzgerald, the prosecutor, told them he is worried about his witnesses testifying before the governor is actually indicted. So, just how strong is the legal case against Blagojevich? Is it possible that he might get off? Former prosecutor and novelist, Scott Turow, will join us next.

And, yesterday, we found out Treasury Secretary Henry Paulson found a loophole in the TARP bailout money that lets banks give out big bonuses to their executives. Now, he says he's confused about why those banks aren't lending that money to us. David Sirota, who has been warning about the bailout since the very beginning, joins us in a moment.

(COMMERCIAL BREAK)

MADDOW: When the singer R. Kelly was facing really, quite mind-blowing underage sex charges, a Chicago lawyer named Ed Genson defended him successfully. Mr. Kelly was acquitted of those charges and Mr. Genson has now moved on to defending Illinois Governor Rod Blagojevich.

Patrick Fitzgerald had Blagojevich arrested last week, and announced a criminal complaint against him. It was just a criminal complaint, Blagojevich was not actually indicted. Fitzgerald has until December 29th to either start preliminary hearings in the case or get a grand jury to indict the guy. Now, while Fitzgerald is getting his case together, he's asking all the other political players involved in this drama to essentially stop what they're doing and wait for him.

The Illinois House's newly formed impeachment committee only met for about an hour today before they adjourned essentially because Fitzgerald asked them, for a formal letter, detailing their witness list for the impeachment hearings. The "New York Times" describes that letter as, quote, "indicating some reluctance of having witnesses testify who might harm the federal case."

Yesterday, Team Obama said they had their own detailed list of contacts between themselves and Blagojevich's office all ready to go, but they said it would not be released publicly until next week, again, because Fitzgerald asked them to hold off so as to not harm his federal case. So, sitting in limbo here while nobody is harming the federal case-is Illinois, the fifth most populist state in the union, down approximately-

50 percent of its United State senators.

And with a state government essentially hamstrung, the "Governor F-word" is still going to work every day and the legislature, and the attorney general, and the lieutenant governor, and the State Supreme Court, they're all occupied with this drama of how, and whether, and when to get rid of Blagojevich-all because of how guilty Fitzgerald made him seem at that hurry-up press conference a week ago.

(BEGIN VIDEO CLIP, DECEMBER 9)

PATRICK J. FITZGERALD, U.S. ATTY. FOR NORTHERN DICTRICT OF ILLINOIS:

We're in the middle of a corruption crime spree and we want it to stop. I was not going to wait until March or April or May to get it all nice and tidy and then bring charges and then say, "By the way, all this bad stuff happened because no one was aware of it back in December." I think that would be irresponsible.

(END VIDEO CLIP)

MADDOW: Stopping a political crime spree in action. Awesome. That's why you're a teen idol, Mr. Prosecutor. On the other hand, what if Blagojevich is innocent? I mean, there's enough evidence in the complaint to make fun of him and make fun of his hairdo and to do fake Chicago accents and swear a lot imitating him, but the governor's new R. Kelly lawyer is having none of this "guilty until proven innocent" stuff.

(BEGIN VIDEO CLIP)

ED GENSON, BLAGOJEVICH ATTORNEY: The media is taking control and I think the case is not what it seems, and I think that when it comes to pass, you'll see it's not what it seems and you'll find that he's not guilty. And he's not stepping aside. He hasn't done anything wrong. We're going to fight this case.

(END VIDEO CLIP)

MADDOW: We're going the fight this case. He hasn't done anything wrong. He's not stepping aside. The case is not what you see him. Wow. Well, the governor himself isn't talking but he says that doesn't mean he doesn't want to be talking.

(BEGIN VIDEO CLIP)

GOV. ROD BLAGOJEVICH, (D) ILLINOIS: I'm dying to talk to you. I'll let you know at the appropriate time.

(END VIDEO CLIP)

MADDOW: OK. You may be dying to talk to reporters, Mr. Governor, but let me tell you, it is they who are dying to talk to you. Is it really possible that Rod Blagojevich is going to survive this? Is the case against him, what we know of it now-is it actually a strong, legal case? Do I need a talking down here? Oh, yes, I do.

Joining us now is the former Chicago federal prosecutor who is more famous than Patrick Fitzgerald, the zillion-selling author and attorney, Scott Turow.

Mr. Turow, many thanks for your time tonight.

SCOTT TUROW, FMR. ASSISTANT U.S. ATTY IN CHICAGO: Thank you, Rachel.

It's nice to be with you again.

MADDOW: Here's your chance to Talk Me Down about this case. Is the evidence in the criminal complaint, the wiretap transcripts and all the rest of it, does it indicate a strong, legal case against the governor?

TUROW: With all deference to my dear friend, Ed Genson, I think the answer to the question is yes. It indicates a very strong case against the governor.

MADDOW: How much harder is it to get an indictment than it is to put together a criminal complaint of the kind that Mr. Fitzgerald did last week? I'm wondering why he jumped publicly when he just had the complaint ready but no indictment.

TUROW: I think he jumped for the reasons that he said, because he was afraid that something bad was going to happen and people were going to find his delaying to get his case tidied up inexcusable. And in terms of an indictment, there's an old saying that a prosecutor can get a grand jury to indict a ham sandwich. So, he certainly didn't choose the easy route, in fact, having to prepare a 78-page complaint for the scrutiny of a federal magistrate, actually, is the harder way to go in this case.

MADDOW: Do you think that it's fair to describe it as a hurry-up press conference, though? Do you think it is-there is a sense in which this was rushed?

TUROW: Well, there's no question it was rushed. I think Pat Fitzgerald and the remarks that you quoted, those basically admitting that it was rushed. The normal progress of the case would have had it indicted in the spring. And the consequence of that is that he's going to lose the ability to use the grand jury much sooner than would be the case if he waited.

But, you know, his reasons for proceeding seem relatively clear. What in the world would happen in this state of Illinois if it were revealed in May that a U.S. senator has been appointed as a result of a process that was so tainted?

MADDOW: Sure. You wrote in the "New York Times" last week that Patrick Fitzgerald doesn't have a history of using the justice system to preempt the operation of other democratic institutions. That said, he is holding up the impeachment proceedings in the Illinois House. He is, at least we hear, he's holding up the efforts of the president-elect to sort of clear himself publicly. How could those things hurt his case? Why might he be delaying those other things?

TUROW: Well, you never want your witnesses to be making multiple statements because they're bound to be inconsistent. Nobody ever repeats a story the same way twice, exactly the same way twice. So, you don't want to create inconsistencies. And what they want, I'm sure, is to get the first crack at this these witnesses in the grand jury, where their testimony is under oath, and can be used in court if there's any variation.

MADDOW: Does talking about selling a political office constitute a crime? I mean, if it hasn't reached the stage of offers given or received, if they're just talking about it?

TUROW: Well, you know, attempted bribery cases are traditionally not popular with juries. I lost one myself years ago. Juries regard it as crime in the head-in other words, bad thoughts but not actual bad conduct. And certainly, when you-it is political horse trading, it's routine in our political process, it's even necessary.

But when you say, I will trade this appointment for a $300,000 a year job for me, you, in my opinion, have crossed the line. He said, you know, "I would like to be appointed to a cabinet position," as he ostensibly did, that's a different matter, because you can argue that there's a public interest being served by the governor being in that cabinet position, no matter what we think about that today.

MADDOW: So, him saying, "I want to be energy secretary" would sort of be just gross politics but him saying, "I want that fat salary, I don't care what if job is," that's a crime?

TUROW: That crosses the line because you're-now, you're into the private benefit in exchange for a public act.

MADDOW: One last question here and about the federal nature of these charges. An attorney named Maureen Martin just wrote in the "Chicago Tribune" that even if this conduct is heinous, she said none would amount to a federal crime without interstate commerce, that our Constitution doesn't allow every local bribery incident to be classified as a federal crime. Do you think she's right about that?

TUROW: Well, yes, she's right about that. But the interstate commerce threshold has been defined in a way that virtually all conduct in American society passes that test. So, I don't think that's going to be a bar here either.

MADDOW: So, Scott Turow, you're the first person in the history of

THE RACHEL MADDOW SHOW to successfully Talk Me Down and convince me he's going down?

(LAUGHTER)

TUROW: Well, you know, we'll see. And I agree with that idea (ph) that the governor deserves his day in court if that's what he wants. But we'll see what happens. I think I'm pretty confident of what the outcome will be.

MADDOW: Scott Turow, former Chicago federal prosecutor, Chicago native, and bestselling novelist, many thanks for your time tonight, Scott.

TUROW: You're more than welcome. It's good to be with you.

MADDOW: A new report about the federal Fish and Wildlife Services that Bush appointed senior managers have a total lack of interest in protecting certain species and habitats. The silver lining here-is it's almost time to take some of them out of their current habitats. More on that in a moment.

(COMMERCIAL BREAK)

MADDOW: We're thinking about starting a new special feature on the show called "The Poorly Handled Economic Crisis Watch."

Today's news, more poor handling of the bailout billions and the fed's low, low bargains on our money. More on that later.

First, though, it's time for a couple of underreported holy mackerel stories in today's news. Irony alert. Code red. Threat of disturbing irony imminent in an unfunny story. An American kidnapping consultant who resolved almost 100 kidnapping cases in Latin America, was himself, kidnapped after delivering a seminar to police and business executives on how to avoid being kidnapped.

Felix Batista was in northern Mexico last week. He was snatched outside a restaurant in Saltillo, a state capital, about three hours from the Texas border. Mr. Batista got a call on his cell phone. He left to take the call outside when armed men came out of an SUV, threw him into it and sped off.

Such a brazen abduction had the police pinning the attack on drug gangs wanting to show their power. Batista was quoted in a recent "McClatchy" article about the growing risks of kidnapping by drug trafficking cartels. He told "McClatchy," quote, "The narco kidnappers are not looking for chump change."

Now, the "L.A. Times" says about two people are kidnapped every day in Mexico, but that's only the reported statistics. Since many people refuse to report the crime, the nation's human rights ombudsman says the average daily number of kidnappings is more like three or four times that.

The FBI and Mexican authorities are investigating Mr. Batista's abduction and his relatives are working on his release.

Just because I said it's ironic doesn't mean that it's funny. But it is irony.

Finally, is President-elect Obama putting together a pick-up basketball game or a cabinet or both? In addition to his previous basketball-playing cabinet picks like Eric Holder, Gen. Jim Jones and Susan Rice, Obama has now named his long-time basketball buddy and head of the Chicago Public Schools, Arne Duncan as his education secretary. Mr. Duncan played basketball with Obama on Election Day. He was co-can entertain and an academic All-American on the Harvard basketball team before he played pro-ball in Australia.

Obama joked today that he is putting the best basketball playing cabinet in American history which is bold talking of trash, given the legendary two-handed set shot, Dane Atchison(ph) and the ball-handling wizardry of April Harman(ph) back before the three-point line and the shot clock.

(COMMERCIAL BREAK)

MADDOW: Remember that whole U.S. economic crisis thingy that's swallowing our quality of life and hope for the future like a black hole? Well, you know how, on yesterday's show, we talked about how Congress tried and failed to set limits on how much federal bailout money the banks could spend on executive pay?

Well, here's what we learned today - the story advances. Fed Chairman Ben Bernanke dropped the interest rates to a range of zero to a quarter of one percent and he announced plans to print money, specifically, for lending programs.

In other words, he is so desperate for people to start lending and borrowing again he's making money sort of free. Dateline Washington, Bernanke makes money grow on trees. The market for Ron Paul bumper sticker explodes.

Haven't we already given banks hundreds of billions of dollars so they will start lending again? That wasn't enough? This is supposed to work? All right. Sen. Reid, let's hear it.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV): Most of the big banks received capital funding through TARP, some $225 billion. We're healthy and should be using the new capital for lending, and they're not.

(END VIDEO CLIP)

MADDOW: And they're not. Well, OK. But Treasury Secretary Hank Paulson is basically in charge of the bailout. What does he say about whether banks are lending?

(BEGIN VIDEO CLIP)

HANK PAULSON, TREASURY SECRETARY: They are obviously lending, so the question is, are they lending enough? And the answer from everybody is, no. I think most people say they are not lending enough. Most people say they are lending much more than they would have been lending if we hadn't done this.

(END VIDEO CLIP)

MADDOW: So the bailout did something, but not what we needed it to do. It didn't work. It didn't do what justified the money in the first place. It seems like every day we learn a new way that this bailout fails in its basic purpose.

Like in the Iraq War fiasco, it's not like we were not warned. There were those that knew this would happen and who publicly predicted the sort of shortcoming that seemed to surprise Congress at every turn. Since we are about to move on to a fancy new auto bailout, probably tomorrow, and the banking bailout remains a problem - a big, looming $700 billion there-goes-the-future problem.

Kind of seemed like a good idea to call up one of the people who has been right so far about the shortcomings of the bailout to give us a glimpse of the rights and wrongs that are about to happen next.

Joining us now is David Sirota, who is a syndicated columnist who has been ahead of the curve on the red-hot failures written into mammoth Wall Street bailout. Mr. Sirota, thanks for joining us. Nice to see you.

DAVID SIROTA, SYNDICATED COLUMNIST: Thanks for having me, Rachel.

MADDOW: So I feel like the American people got punked on the bailout. But I'm also worried that we would have had some sort of Armageddon without it. Do you think that we got punked?

SIROTA: I think we did get punked in a lot of ways. The Federal Reserve Bank of Minneapolis has reported recently that when it looked at the fed's actual data on inter-bank lending and on bank-to-business lending and on commercial paper that there has not been a decrease in lending, that there wasn't a decrease in lending when we passed the bailout bill, and there hasn't been a decrease in lending.

And the fed concludes the case had not been made to cut a blank check to Wall Street for a trillion dollars. Now, a lot of us were saying this at the beginning, and a lot of us were written off as irresponsible. But this is the Federal Reserve talking to us right now.

MADDOW: You're saying though it's not just that the bailout isn't fixing the problem it was designed to fix? You're saying problem wasn't there?

SIROTA: I'm saying that there was probably a problem there, but there was certainly not as huge a crisis as everyone was talking about, to the point where we needed to cut a trillion check to Wall Street with almost no oversight whatsoever.

MADDOW: Well, what should have been done given the size of the problem and the character of the problem, as you see it now in retrospect, looking back at the last couple of months of rhetoric and argument about this?

SIROTA: Well, I think what we need first and foremost is better oversight. The GAO is telling us that there is no oversight of this bailout. I think what we needed at the beginning was Congress moving much more slowly, appropriating, let's say, $50 billion or $100 billion at a time and putting a lot of money into economic stimulus which we still haven't gotten.

We're still waiting for economic stimulus for Main Street. You know, the best way to fix the economy is, you know, fix the economy.

MADDOW: Well, lets go through some of the alarms that you and other critics both left and right raised during this mad dash to pass the bailout. You think, for example, that what we talked about on this show last night, this language supposedly reining an executive compensation that was totally toothless. You think that should have been obvious ahead of time?

SIROTA: It was obvious. The Treasury Department was holding conference calls with Wall Street analyst and executives saying - and this is before the bailout vote - saying that that the language in the bailout bill before it was voted on in Congress, was written to be unenforceable.

And now what do you know? Four months later, there's a story on the front page of the "Washington Post" saying, news flash, the executive compensation limits are unenforceable.

MADDOW: President-elect Obama was for this bailout. What do you think that he can do? He's going to be essentially inheriting the implementation of the bailout. What do you think he can do to make sure the rest of this actually works and gets the economy moving? Or do you think that he should something in addition to his proposed stimulus plan that's in a totally different direction?

SIROTA: Well, I think what he can do is - I think he can use as much money that hasn't been spent already for a real Main Street economic stimulus. I think what money that continues to be invested in banks - he can put more string on or at least ask Congress to pass a bill that puts more strings on it. Like for instance, the money that is invested in banks needs to be lended(sic) off of. The capital needs to be lended(sic) off of at a greater rate.

MADDOW: Yes. You can require that. That's what they did in Britain, right? When they did their own bailout, they just made it mandatory. They didn't say, "We hope that the banks won't use this money to do lending." They said, "If you get this money, you shall lend," right?

SIROTA: That's exactly right. And here's the thing. What he can say is that none of this money is going to subsidize executive pay packages. None of this money is going to subsidize banks shareholder dividends. Remember, banks are still paying dividends to shareholders, banks that are getting taxpayer money. In other words, taxpayer money is subsidizing the dividends of shareholders of banks.

MADDOW: Well, that's because those dividends reflect how well those banks have performed in getting money from the taxpayers, I supposed.

SIROTA: Yes. I guess, you can look at it that way. Yes, that's right.

MADDOW: David Sirota, syndicated columnist, thank you for coming on tonight. Your analysis here has been really invaluable to me when I try to learn about these issues. Thanks, David.

SIROTA: Thanks for having me, Rachel.

MADDOW: George Bush's Department of the Interior is famous, of course, for its cocaine party and its employees sleeping with the employees of the energy companies who were supposed to be doing business with and being regulated by the Interior Department. That's where we got the whole "snorting crystal meth off the toaster oven's" vision.

Well, the Department of Interior now delivers us, lucky taxpayers, an inspectors general's report which says investigators found a, quote, "enormous policy void at the Department of Interior." It's about the Endangered Species Act. And fortunately, the lame duck is not protected. Quackitude update, next.

But first, one more thing - you want to talk about lack of oversight, a supposed regulatory agency not doing its job? How about the SEC, the Security and Exchange Commission? You have sure heard by now of Bernard Madoff. He allegedly pulled off one of the greatest Ponzi schemes in history, milking investors like Steven Spielberg and Mort Zuckerman and oh, the city of Fairfield, Connecticut, for something like $50 billion.

According to the "Washington Post", concerns about Madoff have been red flagged to the SEC for years. They even got a letter back in 1999 accusing Madoff of running a successful charitable foundation? No, a Ponzi scheme, which is what he was doing and nothing was done.

Tonight, the head of the SEC, Chris Cox, acknowledges the failure of his staff to look into these allegations. He says he wants an internal investigation into what happened.

Attention crooks. Government indignation at its own failure to stop you starts at $50 billion years later. So, bilk at your own risk, huh?

(COMMERCIAL BREAK)

MADDOW: Here's a mini-news scoop item thingy. Tomorrow, President-elect Barack Obama will announce that he has selected Colorado Senator Ken Salazar to be the next Secretary of the Interior. Congratulations, Sen. Salazar. You must be psyched unless you've Googled "Interior Department" lately.

Interior is the department that apparently took it upon itself to try to live up to its vaguely porny-sounding name where top employees were in bed, literally, with oil company officials they were supposed to be regulating, where employees snorted crystal meth off toaster ovens, and where they received high-staff performance awards if they were able to score their boss' cocaine.

And remember Jack Abramoff? As a member of the Bush administration's transition team assigned to the Interior Department, Abramoff befriended then Deputy Secretary Steven Griles, who last year, pled guilty to obstruction of justice in the Abramoff scandal. He was sentenced to 10 months in the pokey.

And it gets worse than that. This is George Bush's Interior Department you're inheriting. Sen. Salazar, bring them up.

With 34 days left in the Bush administration, it is time once again for THE RACHEL MADDOW SHOW's "Lame Duck Watch," because somebody's got to do it.

Yesterday, another inspect general report on the Interior Department was issued revealing that officials have been meddling with the Endangered Species Act. The report says a high ranking Interior Department official tainted nearly every decision made on the protection of endangered species over a five-year period.

Who is that official? It would be President Bush's political appointee, Julie MacDonald. Not seen here. MacDonald is the former deputy assistant secretary who oversaw the Fish and Wildlife Service.

We looked everywhere for a picture of her and we couldn't find one. Instead, we bring you a picture of the endangered pygmy rabbit, the smallest rabbit in North America.

Back to that report - sorry - which focused on 20 questionable decisions made by the U.S. Fish and Wildlife Service, finding that MacDonald had a hand in at least 13 of them. The report also found that MacDonald had help from at the agency who, quote, "enabled her behavior and aided and abetted her."

MacDonald last year after investigators found she had tampered with scientific evidence, improperly removed species and habitats from the endangered species list and that she gave internal documents to oil industry lobbyists and property rights groups. Heck of a job, Julie Mac.

MacDonald's influence in the Fish and Wildlife Office was so prevalent that one unnamed employee told investigators that her decision got their own name. "It became a verb for us," the officials said, "getting MacDonalded."

How did the Interior Department become the most ostentatiously corrupt department of the Bush administration? They are supposed to protect our nation's natural and cultural heritage, not to MacDonald the environment.

Joining us now is Francesca Grifo who is the director of the

Scientific Integrity Program and senior scientist at the Union of Concerned Scientists. Dr. Grifo, thank you for being on the show tonight.

DR. FRANCESCA GRIFO, DIRECTOR, SCIENTIFIC INTEGRITY PROGRAM: Thank you, Rachel.

MADDOW: Already, seven rulings made by Julie MacDonald under the 30-year-old Endangered Species Act have been revised including putting the white-tailed prairie dog back on the list. What do you think of the implications of this report and taking endangered species off of that list?

Well, I think what this report does is barely scratch the surface. Depending on who you talk to there are a number of nonprofit groups working on this. The list could be very, very larger. I mean, even as high as 50, 60, 70 species decisions that she tampered with.

And I think what is important is a lot of the Endangered Species Act is about economic and biological factors. But the part she was tampering with was the part of the act that is - you know, the decisions are to be made on the best available science. But she didn't like the best available science, and so she changed it.

MADDOW: What ideologically motivates people who are coming from Julie MacDonald's perspective on an issue like this?

GRIFO: Well, I think there are those who have an ideological perspective on control and government controlling the use of land and so on. But I think in many of these cases, they were more economic concerns. And that's where we see a lot of these examples across the federal government - is where the economics bumps up against the science. And in many cases, the science loses and the economic concern wins.

MADDOW: You are a biodiversity specialist, I know. How do you view the Endangered Species Act? Is it something that is precious and needs to be preserved? Is it something that doesn't do as much as it could? Is it something that ought to be rethought?

GRIFO: Well, I think it's a product of when it was put together. I mean, it's rather old. It came in to being under the Nixon Administration. But I think it is the best we have. Parts of it work extremely well and I would be loathe to abuse it or let go of it at this point in time.

MADDOW: We're hearing from the president-elect all sorts of nice things about the word "science," saying nice things about the idea of facts. I imagine it has to be heartening to you. But you obviously have to be counting on more than words, more than just rhetoric here. What are you looking for from the new administration in terms of respect for science and undoing some of what we have been through for the last eight years?

GRIFO: Well, I think when we look at our issue, which is scientific integrity, what we're looking for is - it's very difficult to say abuses of science will be outlawed. That not - you know, it's just not going to work.

Rather, what we are looking for is transparency. We need to open it up. You know, sunshine is the best disinfectant. Really be able to see the inner workings of government so that we can fully understand. There are also aspects of regulatory reform that need to be much more open.

We need to protect scientists. Right now, the whistleblower protections that we did have, have been, you know, vastly eroded by the courts. So if you are a scientist and you see something wrong, you see an abusive science. You're putting your career on the line when you go to report it. So these are the kinds of things that we need to have looked at.

MADDOW: Francesca Grifo, director of the Scientific Integrity Program and senior scientist at the Union of Concerned Scientists, thanks for coming on the show tonight.

GRIFO: Thank you.

MADDOW: Coming up on "COUNTDOWN," Keith talks with Constitutional Law expert Jonathan Turley about Dick Cheney's latest interview. Did the vice president admit he committed a war crime?

And next on this show, I get just enough pop culture from my friend, Kent Jones. Just how dangerous are romantic comedies?

(COMMERCIAL BREAK)

MADDOW: Now, it's time for "Just Enough" with my friend, Kent Jones. Hi, what have you got?

KENT JONES, POP CULTURIST: Good evening, Rachel. Well, in Chicago today, after President-elect Barack Obama announced Arne Duncan as his education secretary, he fielded some questions from some elementary school kids.

Very smart. They asked him about Iraq. Obama said he had plans to have the troops home in a year and a half. They also asked him about visiting other countries as president. Obama said he expects to meet some kings and queens. That was meant nicely. Then, Obama was asked about the dog he promised Malia and Sasha.

(BEGIN VIDEO CLIP)

BARACK OBAMA, UNITED STATES PRESIDENT-ELECT: You know, if they do their business, if they've got some poop, you have to make sure you are not just leaving it there. I want to make sure my kids are taking care of their dog properly. But I think they are old enough now to do that. Anybody here have a dog? Oh, OK. Do you guys walk your dogs? OK. I just want to make sure. All right.

(END VIDEO CLIP)

JONES: So just to recap, when there's poop, don't leave it there. It lacks poetry, but as a broader mission statement, I love it.

MADDOW: Wow. Yes.

JONES: Next, are romantic comedies bad for you? Researches at Heriot-Watt University at Edinburgh, Scotland studied top box office movies and found out romantic comedies make people unrealistic about their relationships. They say that unlikely happy endings and improbable plots and flawed philosophy reinforce a warped sense of what a perfect relationship ought to be.

The study also claims that romantic comedies oversimplify the process of falling in love and give the false impression that love can and should be achieved without any effort.

So good news. We've got a brand-new scapegoat. Doesn't matter what happened in your relations - it's Hugh Grant's fault. Blame him.

And finally, happy birthday to Ludwig Van Beethoven, the composer, born to a family of musicians in Bonn, Germany 238 years ago today. We're listening to Beethoven's Sixth Symphony, the so-called Pastoral Symphony, composed in 1808.

After a week of Blagojevich, and bailouts and shoe-tossing and Dick Cheney torture talk, I thought you might need a palate cleanser. It's very nice.

MADDOW: It is nice.

JONES: Very soothing.

MADDOW: Yes, thank you, Kent.

JONES: We can even enjoy this for just a moment.

MADDOW: Especially after the poop talk.

(CROSS TALK)

JONES: Well, poop and Beethoven. That's how it works.

MADDOW: Thank you, Kent. And thank you for watching tonight. We will see you here tomorrow night. Until then, you can E-mail us, rachel@msnbc.com . Check out our podcast - go to iTunes or Rachel.MSNBC.com, my Air America radio show is coast to coast at 6:00 p.m. Eastern.

"COUNTDOWN" with Keith Olbermann starts right now.

Good night.

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

END

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