updated 12/22/2008 5:15:22 PM ET 2008-12-22T22:15:22

Guests: Michael Smerconish, Bill Press, John Harwood, Richard Wolffe, Ron Brownstein, John Cloud, Lynn Sweet, Mary Mitchell, Trish Regan

DAVID SHUSTER, MSNBC ANCHOR:  Tonight Blagojevich speaks and Democrats win, but there is good news regardless for President-elect Barack Obama as his transition rolls towards “1600 PENNSYLVANIA AVENUE.”

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

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

Today Illinois Governor Rod Blagojevich finally spoke out on the allegations that he tried to cash in on Barack Obama‘s vacated senate seat.

(BEGIN VIDEO CLIP)

GOV. BLAGOJEVICH, (D) ILLINOIS:  I will fight.  I will fight.  I will fight until I take my last breath.  I have done nothing wrong.

(END VIDEO CLIP)

SHUSTER:  Just ahead, we will have the latest from Chicago.  A long protracted battle with Blagojevich is bad news for many Democrats.

But one Illinois politician, President-elect Obama, got an important victory; a bailout of the auto industry.  President Bush delivered the lifeline Obama and the big three had been asking for.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES:  The American people want the auto companies to succeed and so do I.  So today I‘m announcing the federal government will grant loans.

(END VIDEO CLIP)

SHUSTER:  $17 billion worth.  Coming up, we will go through the plan, examine what‘s next and talk about the politics.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT-ELECT OF THE UNITED STATES:  I do want to emphasize to the big three automakers and their executives that the American people‘s patience is running out.

(END VIDEO CLIP)

SHUSTER:  Later, Obama rolled out four more cabinet selections today. 

We‘ll bring you an unusual way to look at all the nominations.

Plus, we are rolling out a new segment tonight called “The Grill.”  It‘s especially appropriate today because in the wake of Obama‘s decision to have controversial Pastor Rick Warren participate in the inauguration, a columnist is now calling Obama a bigot.  Talk about a reach.  Anyway, that columnist will meet the Shuster grill tonight.

And portrait paintings.  President Bush got a look at his today at the National Portrait Gallery.

(BEGIN VIDEO CLIP)

BUSH:  Thanks for coming.  I suspected there would be a good size crowd once the word got out about my hanging.

(END VIDEO CLIP)

SHUSTER:  But we begin this hour with the man many Democrats, including Barack Obama, wish would go away even sooner than President Bush.  Rod Blagojevich, the governor of Illinois, continues to be something of a spectacle as he faces charges of trying to sell Obama‘s senate seat.  Today Blagojevich delivered his first formal remarks since the criminal complaint was unveiled.

(BEGIN VIDEO CLIP)

BLAGOJEVICH:  I‘m dying to answer these charges.  I‘m dying to show you how innocent I am.  And I want to assure everyone who‘s here, and everyone who‘s listening that I intend to answer every allegation that comes my way.  However, I intend to answer them in the appropriate forum in a court of law.  And when I do, I am absolutely certain that I will be vindicated.

(END VIDEO CLIP)

SHUSTER:  You all remember that two days ago, Blagojevich quoted Elvis Presley.  Today the governor quoted Roger Kipling on not hating and then he added this.

(BEGIN VIDEO CLIP)

BLAGOJEVICH:  Now, I know there are some powerful forces arrayed against me.  It is kind of lonely right now.  But I have on my side the most powerful ally there is; and it is the truth.

(END VIDEO CLIP)

SHUSTER:  In the midst of the governor‘s showmanship, the Obama transition team has pledged to answer some questions next week about their contacts with Blagojevich.  At least the few Obama officials, including chief of staff Rahm Emanuel, apparently conversations with Blagojevich, perhaps about the senate seat.  There is no evidence Emanuel or anybody else working for Obama did anything illegal.

Still, if Emanuel and others heard what Blagojevich was allegedly up to and did not notify authorities, that would at the very least be politically embarrassing.  Joining us now from Washington, Lynn Sweet, Washington bureau chief with “Chicago Sun-Times” and in Chicago Mary Mitchell, editorial board member and columnist at the “Chicago Sun-Times.”

Lynn, what do you make of what he did today?

LYNN SWEET, WASHINGTON BUREAU CHIEF, CHICAGO SUN TIMES:  Absolutely in character.  He quotes Kipling.  I think he thought it was inappropriate to bring up the Elvis quotes today because of the gravity of the situation.

He was trying to influence, if nothing else, the potential jury pool in Cook County who one day will likely be hearing charges against him.  And important for him, he is trying to slow down the stampede against him right now.

SHUSTER:  Mary Mitchell, he talked about a political lynch mob that is after him.  Are there fears in the Obama camp tonight that if Blagojevich fears that he is going down, he may try to bring some people with him regardless of whether he speaks the truth or not?

MARY MITCHELL, COLUMNIST, CHICAGO SUN-TIMES:  Well, I don‘t think that fear is out there.

Here‘s the problem.  Blagojevich has a lot of gall.  What he did today, he could have done a week and a half ago.  He gave us nothing new.  He tried to play upon the sympathies of the public and he really basically didn‘t answer any questions.

I don‘t think the Obama camp has anything to fear from anything that‘s going on with Blagojevich.  He is just wasting taxpayer‘s money.

SHUSTER:  You think that‘s how it‘s going to play in Chicago.  I mean, everyone has a chance tonight to see all these clips in the news conference; to see him wishing everybody a happy holidays, a merry Christmas, happy New Year in a sort of showman kind of style.  How does that go over?

MITCHELL:  It is bold; it is, as Lynn said, in character.  He is the kind of guy who figures he can talk his way out of just about anything.

And here‘s the point that I would like the make.  To remind the public because he has such great authority, he is like the police officer who is accused of something.  What do you do?  You relieve that officer of his duties until the situation is cleared up.

If a teacher is accused of sexually molesting a student, he may not be guilty but you relieve that teacher of his duties until it cleared up.  Rod Blagojevich showed today how selfish he really because all he is thinking about is himself.  He is not thinking about the people in Illinois.

SWEET:  Politically, he is elected.  And where he went, you had to hear some violins playing in the background.  That‘s what he hoped you would be hearing.  Dab your eye a little about this political lynch mob after him.

And Mary, my dear colleague, I think we both know that back in Illinois, he already was one of the most unpopular political figures.  We know that.  This has been reported.

What he is trying to do though is stop the sinkhole he is in.  And whether or not he is—the worst problem he has right now is whether or not people think he is overstaying his tenure as governor because he has this very serious criminal charges and the impeachment by trying to slow down the impeachment at the least which is his lawyer‘s going to be pretty good at with just a mountain—

MITCHELL:  True.

SWEET:  And wasting taxpayers‘ money.

MITCHELL:  Yes. 

SWEET:  Because taxpayers ultimately have to pay for this.

But Mary, tell me if you agree, the point here though is that in the fight for his political life, he is using a tool that he has that is reasonable.  He is now speaking to the public to try and ask him at least to give him the benefit of the doubt.  He is doing this, as Mary noted, content free.  We don‘t know one more fact as to why we shouldn‘t throw book at him right now from what we know from the criminal complaint.

That‘s a strategic move he made.  This works once.  It can‘t work twice.

SHUSTER:  All of this sets the situation next week where the Obama transition has pledged to answer all of the questions.  We know that the president-elect is going to be in Hawaii so it will likely be some staff who may provide some details.

But the Chicago Sun-Times, your paper raises an interesting point today about contacts.  “Emanuel—Rahm Emanuel talked with the governor in the days following the Nov. 4 election and pressed early on for the appointment of Valerie Jarrett to the post, sources with knowledge of the conversations told Sun-Times.  There was no indication from sources that Emanuel brokered a deal, however.

A source with the Obama camp strongly denied Emanuel spoke with the governor directly about the seat, saying Emanuel only spoke Blagojevich once recently to say he was taking the chief of staff post.”

Nonetheless, that is something, regardless of how often they have this sort of contacts.  Emanuel at a certain point is going to have to come out and say here‘s what I know or here‘s what I didn‘t know.  Right?

SWEET:  I hope, and I‘ve been reserving judgment if Obama‘s team wanted to agree with Fitzgerald‘s request and give him a few more days, that‘s fine with me.  I just hope when we get report for the administration that says they want to be transparent.

I hope we have a time line.  I hope we have list of the contacts.  I hope that they omit nothing important because sometimes some of the people involved in this operation sometimes—maybe we have a difference of opinion—but I think sometimes they omit some things that are kind of maybe helpful to know.

I hope that they look at the story in context and just say from the beginning, what happened in a timeline, laid out neatly, no summary, narrative and just let us know as many facts as they can.  That‘s what I‘m hoping.  And if they could use this week to take that extra time to make a more detailed report, I‘m all for it them using the extra time.

SHUSTER:  I‘m also hoping that it is not adversarial because at this stage, there is no reason for them or the press to make—

there‘s no evidence they did anything wrong.  And you know, of course Rahm Emanuel and others will have had contacts with Rod Blagojevich.  That was essentially his job.  There‘s nothing wrong with that.  I think the question is going to be will Rahm Emanuel just simply come out and say, “Look, here‘s what I know and here‘s what I didn‘t know.  And here‘s some of the information that maybe we‘re still trying to figure out what happened.

In any case, Lynn Sweet and Mary Mitchell, thank you both very much.  Good to see you.  Happy holidays.

Up next, President Bush bails out the auto makers with TARP money a month after Democrats asked him to bailout the automakers with TARP money.  So what changed?  And why the wait?

We‘ll look at the consequences of presidential inaction when “1600 PENNSYLVANIA AVENUE” returns right after this.

(COMMERCIAL BREAK)

SHUSTER:  After a week of keeping the troubled U.S. auto industry waiting and even openly speculating yesterday about an orderly bankruptcy, today President Bush announced that the White House would come to Detroit‘s rescue as the automakers had requested.

(BEGIN VIDEO CLIP)

BUSH:  The people want the auto companies to succeed and so do I.  So today I‘m announcing that the federal government will grant loans to auto companies under conditions similar to those Congress considered last week.

(END VIDEO CLIP)

SHUSTER:  Industry leaders in Detroit hailed the announcement and promised to transform the way they do business.

(BEGIN VIDEO CLIP)

RICK WAGONER, CEO, GENERAL MOTORS:  In many ways, our restructuring plan accelerates and expands the transformation that we‘ve been driving in North America for the past several years.  But it is really a blueprint for a new General Motors, one for our second 100 years.

(END VIDEO CLIP)

SHUSTER:  Will it be more than a band-aid?

Here are the details of the deal.  GM and Chrysler get a $13.4 billion bridge loan with money coming from the $700 billion rescue fund with $4 billion more coming in February if Congress releases the second half of TARP money.  But there are some strings attached.

Automakers must prove their viability by March the 31st or the loan will be quote, “called,” meaning, treasury gets the money back and the deal puts also limits on executive compensation meaning, no more corporate jets.  The deal also says autoworker wages and benefits must be, quote, “competitive with foreign auto companies by the end of 2009.”

Joining us to talk through the details and the implications of the deal, Trish Regan, co-anchor of CNBC‘s “The Call.”  And Trish, first, give us a sense as far as the big three.  What they‘re getting now.  They could have gotten the same thing a couple of weeks ago.  How much worse shape are they in now and does this help them?

TRISH REGAN, CNBC CO-ANCHOR, “THE CALL”:  It certainly helps them, David.  It gets them through the next couple of months which is critical because the concern was that they would have to file for bankruptcy.  They wouldn‘t be able to make it until the end of March.  And there is a lot of fear about the ripple effects of a bankruptcy from the likes of GM or Chrysler would mean for the entire economy.

So they can all take a deep breath and say, all right.  At least we‘ve got something for now.

The real question is what‘s going to happen come March 31st?  You said it well.  This is essentially a case of President Bush punting to the next administration.  Some have said he didn‘t want to be Hooverized (ph).  He didn‘t, in other words, want to be the one that was blamed for in his final weeks of office, having the car makers go under.

SHUSTER:  What is the biggest decision that will confront Barack Obama at the end of March?

REGAN:  Whether or not to keep lending them money.  Everyone I talked to says, “You know what?  This just isn‘t going to be enough.”  Keep in mind, David, the economy is still in a very fragile place.  It is not like anyone is anticipating we‘re going to have a massive recovery by March 31st.

So it‘s still going to be difficult for people to get loans.  If you want to buy a car, can you get the loan to actually go and make that purchase?  And then a lot of people are still very worried about making big ticket purchases because they‘re concerned about their jobs.  We‘re dealing with an unemployment rate that continue to escalate.

So those are two major problems for the car companies.  And then of course, there is the whole issue of the unions and the UAW.  Whether or not they can reach some kind of agreement when it comes to the benefits that are provided to all these workers and whether they can reach an agreement in terms of pay.  These are big issues.

And then you deal with the basic issue of whether or not these car companies are capable in the near future of manufacturing vehicles that Americans, you and I, want to go out there and buy, David.

SHUSTER:  Speaking of the unions, here in Washington, it seems so clear that a number of Republicans, in fact, even in a memo before the debate and vote last week, they were engaged in union busting on a massive scale.  They saw this as a huge opportunity to essentially break the UAW.  And the final deal still puts some pretty strong restrictions on UAW.

Here‘s the reaction from Gettelfinger who is the UAW rep. 

He says, “While we appreciate that President Bush has taken he emergency action needed to help America‘s auto companies weather the current financial crisis, we are disappointed that he has added unfair conditions singling out workers.  These conditions were not included in the bipartisan legislation endorsed by the White House, which passed the House of Representatives and which won support from a majority of senators.  We will work with the Obama administration and the new Congress to ensure these unfair conditions are removed, as we join in the coming months with all stakeholders to create a viable future for the U.S. auto industry.”

The UAW is going to have a pretty friendly advocate in the Obama administration in this, right?

REGAN:  Well perhaps.  But a lot of people are also saying we‘ve already seen evidence thus far that the president-elect is really willing to kind of stand up to what you might think would be his conventional position.  So it remains to be seen.

One thing that is pretty much certain is that car companies, David, cannot continue on as they are with the union agreements that they have in place because they just are not able to be productive enough when they‘re paying so much out in terms of wages, in terms of benefits.  A lot of fiscal conservatives have felt a bankruptcy was actually the most ideal situation because you really would have been then able to restructure the entire company.

That said, David, a bankruptcy would have been very dangerous for the overall economy because we‘re in such a difficult position right now.  And a lot of people have said you know what?  Maybe in March, maybe next summer, maybe then the economy can handle a bankruptcy from one of the big three.  But right now we just can‘t handle it.

SHUSTER:  Trish Regan, co-anchor of CNBC‘s “The Call.”  Trish, thanks for coming on.  We appreciate it, as always.

REGAN:  You bet.

SHUSTER:  And again the politics in this decision today was so intriguing.  We‘re going to get to that later in the show; the politics of President Bush and President-elect Obama on the auto bailout.

Up next, the final historic image of George W. Bush‘s presidency.

No, no.  Not that.  We‘re actually talking about his presidential portrait. 

We‘ll show it to you when “1600” returns.

(COMMERCIAL BREAK)

SHUSTER:  We are back with a look at what‘s going on inside the “Briefing Room” today.  Barack Obama unveiled his final cabinet picks.  Congresswoman Hilda Solis as secretary of labor.

(BEGIN VIDEO CLIP)

OBAMA:  Under her leadership, I‘m confident that the department of labor will once again stand up for working families.

(END VIDEO CLIP)

SHUSTER:  Former Congressman Ray LaHood as transportation secretary. 

(BEGIN VIDEO CLIP)

OBAMA:  Throughout his career, Ray has fought to improve mass transit and invest in our highways.

(END VIDEO CLIP)

SHUSTER:  As administrator of the small business administration—

(BEGIN VIDEO CLIP)

OBAMA:  I‘m confident that Karen will lead an SBA that will not only help small business owners realize their dreams but help our nation rebuild our economy.

(END VIDEO CLIP)

SHUSTER:  And Mayor Ron Kirk as U.S. trade rep.

(BEGIN VIDEO CLIP)

OBAMA:  Ron will help make sure that any agreement I sign as president protects the right of all workers, promotes the interests of all Americans, strengthens American businesses, and preserves the planet we all share.

(END VIDEO CLIP)

SHUSTER:  Altogether, this is the earliest an incoming president has laid out his cabinet since Richard Nixon did in 1968.

That said, just what is the make-up of this Obama cabinet team?  There are eight state schoolers, Seven Ivy Leaguers, six raised in the Midwest, five women, four raised in New York, four basketball players, four African-Americans, three Hispanics, three westerners, two Asian-Americans, two Republicans, two sitting senators, two sitting governors, and two raised in the south.

And if you thought I was going to sing along, you‘re kidding yourself.

Next up, a first in presidential portrait history; today the National Gallery unveiled its official portraits of President Bush and the First Lady.  In the past, this has always been done after the president leaves office but I guess they just couldn‘t wait this year.

President Bush chose a Yale classmate to paint his portrait.  As you can see, he went a more informal pose.  The portrait is based on photographs taken of the president at Camp David in April and September of this.  A group of donors from Oklahoma pooled together $160,000 to fund the president‘s portrait.

As for the first lady, a Texas garbageman‘s foundation came up $40,000 for her portrait.  She went with a native Russian painter who now lives in Texas.  Her portrait shows her reading in one of her favorite spots in the White House.  And you may recognize the back drop from this photo from this photo from last month when the president and first lady hosted the president-elect and first lady to be at the White House shortly after the election.

One interesting footnote, according to a White House spokesman, these paintings are not the official, official portraits.  Those will be completed after President Bush leaves office and will hang at the White House.  Hmm.  Could they be the first new pieces of art in the Obama White House?

Up next on “1600” master piece political theater Rod Blagojevich recites the classics.  We‘ve got one for you, governor.  If you think you‘re on the verge of a political comeback.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  Forget about it!

UNIDENTIFIED MALE:  Forget about it. 

UNIDENTIFIED MALE:  Forget about it.

UNIDENTIFIED MALE:  Sometimes it just means forget about it.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE.  Today, President Elect Obama filled in the final seats in his cabinet far earlier than usual.  It was the political headline of the day until Illinois Governor Rod Blagojevich stepped up to a microphone for the first time since being charged with corruption for, among other thing, allegedly trying to sell Obama‘s Senate seat.  Blagojevich decided he could no longer stand silent as his reputation was being maligned by our transcripts of his own words caught on wire taps.  Today he vowed to fight his persecutors. 

(BEGIN VIDEO CLIP)

GOV. ROD BLAGOJEVICH (D), ILLINOIS:  I‘m not going to quit a job the people hired me to do because of false accusations and a political lynch mob.  I‘m not going to do what my accusers and political enemies have been doing.  That is talk about this case in 30-second sound bites on “Meet the Press,” or on the TV news.  I‘m dying to answer these charges.  I‘m dying to show you how innocent I am. 

(END VIDEO CLIP)

SHUSTER:  Joining us now, Michael Smerconish, Philadelphia radio talk show host and columnist for both the “Philadelphia Inquirer” and the “Daily News,” and Bill Press, nationally syndicated radio talk show host.  Bill, what do you make of Blagojevich? 

BILL PRESS, RADIO TALK SHOW HOST:  Look, the sooner we get rid of the scum bag, the better.  I can‘t believe that he stands up there today with that black hair, that shock of black hair, and talks about the political lynch mob.  We‘re talking about the U.S. attorney who says he was trying to sell a U.S. Senate seat.  But you know, David, the thing is, I think the end of this is going to be as you just said.  He is going to go down.  He‘ll lose office.  But I don‘t think he‘ll appoint a Senate replacement. 

There will be a special election. 

But it is harder to dislodge him than we thought.  The impeachment process is bogged down because Patrick Fitzgerald says, hey, wait a minute, to the legislature, if you have all these witnesses, you could pollute our investigation.  And he is not going to resign.  So what can you do?  I think he may end his term in office.  There will be a special election for the Senate seat. 

The final thing is, god bless America.  In this country, even a scoundrel like Blagojevich is protected by due process.  There is something that satisfying about that.

SHUSTER:  Michael, your view. 

MICHAEL SMERCONISH, RADIO TALK SHOW HOST:  I‘m not going to defend Governor Blagojevich, but I will defend the process.  And the reality is that there is no evidence whatsoever relative to Blagojevich so far.  There is an affidavit that makes reference to transcripts, but we‘ve not heard any tapes so far.  And the man is absolutely entitled to defend himself.  I don‘t buy into the spin that he was making this statement today against the wishes of his counsel.  He has a very cagey and sophisticated trial lawyer on his behalf, which he is entitled to.  And he certainly didn‘t say anything that‘s going to come back and haunt him.  Frankly, he didn‘t say much of anything other than, I‘m innocent and I‘ll fight these charges. 

He offered not a 30-second sound bite, like I guess you get on “Meet the Press,” but instead a two minutes sound bite.  He is entitled to that sound bite. 

SHUSTER:  He did—instead of quoting Elvis, as he did the other day in jogging tights—I guess when you wear a tie and you‘re Rod Blagojevich, you quote Rudyard Kipling.  Here he was today.  Watch.

(BEGIN VIDEO CLIP)

BLAGOJEVICH:  Rudyard Kipling wrote, “if you can keep your head when all about you are losing theirs and blaming it on you, if you can trust yourself when all men doubt you, and make allowance for their doubting, too, if you can wait and not be tired by waiting, or being lied about, don‘t deal in lies, or being hated; don‘t give way to hating.”  I know there are some powerful forces arrayed against me.  It is kind of lonely right now.  But I have on my side the most powerful ally there is.  And it is the truth. 

(END VIDEO CLIP)

SHUSTER:  It‘s kind of lonely?  It is really lonely.  He doesn‘t have any friends, Bill.

PRESS:  It‘s corny as hell.  Again, there is a certain side of me that finds that appealing.  I‘ve talk to several defense attorneys.  I‘m sure Michael has too who say when it comes to selling the Senate seat, there is no evidence that a crime was committed.  Where is the crime?  He may have wanted to.  He may have talked about it.  He may have bragged about it.  It looks like he never got around to it. 

SHUSTER:  In some criminal cases, talking about robbing a bank or actually driving by the bank when you have a plan could be considered intent, even if you don‘t pull it off.  In any case, let‘s transition this to Barack Obama.  A lot of questions that the Obama transition has pledged they‘re going to answer this coming week.  Here‘s what the “Chicago Tribune” editorial said today: “we‘d like to hear Obama say one thing loud and clear right now: the best thing for Illinois citizens would be to hold a special election to fill his Senate seat.  Some Democrats say we should wait, that Blagojevich will be impeached, and Lt. Gov. Pat Quinn will take over and Quinn will make the appointment.  But impeachment will, at a minimum, take months.  That‘s not good for Illinois citizens.  That‘s only good for Illinois Democratic bosses.  It‘s the only way they guarantee that they hold the seat.  Obama surely doesn‘t want, through his silence, to be part of that kind of political calculation.”

One of the wraps, Michael, against Obama is that he has been unwilling to say anything on anything including on a special election.  Is that an issue?

SMERCONISH:  I don‘t think that it‘s a legitimate issue.  Some people are trying to make it an issue.  Maybe Bill has had the same experience.  I get these folks who call me up and they want to paint with such a broad brush, because aren‘t we talking about Illinois?  Aren‘t they both from Illinois?  Consequently, they must be both guilty of something.  It‘s preposterous.  I have no beef whatsoever with the way in which the president-elect has handled this situation.  I think the best thing he can do is stay out of it, and allow this process to run its course. 

SHUSTER:  I‘ve said—My issue has been some of the thing are so obvious about this.  Of course, Rahm Emanuel or some others from the Obama transition had contacts with Blagojevich.  That was their job.  I‘m not quite sure I still understand why there wasn‘t even that admission from Obama‘s transition when this first happened. 

PRESS:  Well, he says that Fitzgerald has asked him not to release the list of those contacts because of the—

(CROSS TALK)

PRESS:  Look, I think this dog don‘t hunt.  I think the story here that everybody is missing is that somehow in the most corrupt political system in the country, Barack Obama, and Dick Durbin, by the way, were able to navigate those waters and get where they are without being in bed with these other guys.  I haven‘t seen any evidence.  If Barack Obama called Rod Blagojevich and said, I‘m resigning my Senate seat tomorrow; I think Valerie Jarrett would be good for that job, nothing wrong with that phone call.   

SHUSTER:  He should be doing that. 

PRESS:  He didn‘t make it, but there‘s nothing wrong with it.

SHUSTER:  There is certainly no evidence that he did anything wrong or that his staff did anything wrong.  But we‘ll find out more about the context of some of these contacts this week. 

The other big story, of course, Caroline Kennedy.  We learned today that she didn‘t vote as often as you like a candidate to vote.  Here is the AP on Kennedy‘s voting record: “according to the Board of Election records, she missed several Democratic mayoral primaries in 1989, 1993, 1997, 2005.  She also skipped the 1994 general election, when Senate Daniel Patrick Moynihan was running for reelection.  It is the same seat she hopes to take over if Clinton is confirmed as secretary of state in the new administration.”

Caroline Kennedy seems perfectly nice, capable.  She‘s had some fascinating life experiences.  Michael, this issue of her not voting, is that an issue? 

SMERCONISH:  It is an issue to me, because I am a geek.  I turned 18 in the spring of 1980, and have never missed an election ever.  But most people are not like me.  Most people lead normal lives, and they‘ve all missed plenty of elections.  Consequently, to my way of thinking, it speaks of her lack of commitment to the process.  But to most people‘s way of thinking, it makes her one of them.  And remember, there is only one voter who matters right now, and that‘s Governor Paterson. 

SHUSTER:  Bill?

PRESS:  We have two geeks here.  I‘ve never missed an election either.  I think what this proves is that Americans still love a fairy tale, especially if it is Camelot.  Right?  And I‘ve been trying to figure out why New Yorkers, of all people, who are supposed to be so sophisticated, are so gaga over Princess Caroline.  And I think I figured it out.  It‘s that they love a rock star as a senator.  They welcomed Bobby Kennedy, even though he never lived there.  They welcomed and embraced Hillary Clinton, even though—whatever it is, for a couple years. 

And I think that they want another rock star.  Otherwise, they would be stuck with Chuck Schumer. 

SHUSTER:  I think also, in a way, she is part of our national historical narrative of the presidency, because of her being the daughter and those incredible pictures when John F. Kennedy -- 

PRESS:  But that does not entitle her to a Senate seat. 

SHUSTER:  No, but it does put her in the running.  It does say, wait a second, here‘s somebody we have essentially watched grow up.  Now the question is can she show that she‘s really committed to it.

PRESS:  She leapfrogs over all the rest of them. 

SHUSTER:  Bill Press, I‘m with you.  Bill Press, Michael Smerconish, thank you both very much.  Coming up next, surveying the battlefield after the epic struggle over an auto industry bailout that pitted Republican against Republican, Midwest against the South, and three CEOs against air travel.  We‘re looking at the winners and losers when 1600 returns right after this. 

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE:  The decision by President Bush today to give the auto makers nearly 17 billion dollars in loans in intriguing on so many political levels.  First, President Bush got hammered today by many members of his own party.  Arizona Senator John McCain said, for example, quote, “I find it unacceptable that we would leave the American tax payer with a tab of tens of billions of dollars while failing to receive any serious concessions from the industry.” 

Then, of course, there is the fallout Barack Obama could face if the auto makers fail next year despite the bailout, and the public sees the loans today as a waste.  Today, the president elect tried to put the burden on the auto makers.

(BEGIN VIDEO CLIP)

OBAMA:  With the short term assistance provided by this package, the auto companies must bring all their stake holders together, including labor, dealers, creditors, and suppliers to make the hard choices necessary to achieve long term viability. 

(END VIDEO CLIP)

SHUSTER:  Joining us now to sort out all the intriguing politics swirling around this story are John Harwood, cNBC‘s chief Washington correspondent and a political writer for the “New York Times,” Richard Wolffe, “Newsweek‘s” senior White House correspondent and an MSNBC political analyst, and Ron Brownstein, political director of “Atlanta Media” and a columnist for the “National Journal.” 

John, first to you.  Dissect President Bush‘s thinking on this today. 

JOHN HARWOOD, “THE NEW YORK TIMES”:  Well, look, President Bush accepted the argument that the automakers have made, that if they didn‘t get the short term assistance, they would be forced into bankruptcy.  It would be disorderly, and lead to liquidation and produce catastrophic effects for the economy.  Once you accept that argument, then you have a powerful incentive to go say, I can find a way to get this money out of the TARP. 

What they did was take many of the conditions that were being discussed in the bipartisan deal between the White House and Congress.  What we see here is all these Republicans complaining today about President Bush‘s decision in the substantive sense shot themselves in the foot.  Had they legislated, had they allowed this to go through, the conditions that President Bush had set under a car czar, which would have been called for in that bill, would have had much greater force than they do now in this non-binding piece of paper that President Bush is going to hand to President-Elect Obama, and President-Elect Obama can change the terms if he wants to. 

SHUSTER:  Richard Wolffe, this is a clear political victory for Barack Obama, right? 

RICHARD WOLFFE, “NEWSWEEK MAGAZINE”:  I think it is, in the sense that this is something that he can now take on and reshape.  He has a problem still dealing with Republicans.  He has to get to 60 votes if he wants anything to go through.  This is so deeply unpopular with them.  This has to be the most unpopular thing since the Medicare prescription drug benefit. 

So he has to get over that hump.  In a sense, look, he has a car industry to work with.  He can screw extra concessions out of them.  But he still has a political football here to play with and it is a tough one. 

SHUSTER:  Ron Brownstein, you write in your column about the bailout and the legacy the Republicans seem to be creating a for themselves.  Talk about it.

RON BROWNSTEIN, “ATLANTIC MEDIA”:  I think it is a real challenge here for the Republicans.  What you‘re seeing in this vote in the House and the Senate is the reality that, especially after these last two elections, what is left in the Republican caucus in both chambers is dominated by members from the most conservative parts of the country, particularly the south and the Mountain West, who are resistant to ideas like this, as they will be to almost any idea that Obama has that will enlarge this sphere of government activism. 

What you have though is a situation in which they will be—they opposed this overwhelmingly.  The vote was overwhelmingly against it among Republicans from the south and from the west.  But in so doing, they will put at danger Republicans from the Midwest and the Northeast.  What Bush did today was an acknowledgment of the reality that if you allowed GM to go bankrupt, you might have catastrophic economic consequences.  They talked about a million lossed jobs, a full point of GDP. 

If that did occur, if he stepped aside today, and allowed Republicans in the Congress to block this vote and that occurred, the political consequences could also have been catastrophic, especially in the Rust Belt.  That is the kind of dynamic that the GOP caucus is going to face, because it is lop-sidedly tilted towards members from the most conservative parts of the country. 

SHUSTER:  Go ahead, John.

HARWOOD:  David, I want to say, as long as those consequences are avoided, the Republicans are not likely to pay a price for that opposition.  They may have scored political points.  What I‘m saying is, for the principles they were claiming to espouse, they didn‘t get the job done.  In fact, they went backwards, because of forcing the president to use the TARP. 

BROWNSTEIN:  Bush saved them from themselves on this. 

SHUSTER:  Is there anything the Obama administration, when they take office, can do now to take advantage of this lingering divide here at the end of 2008 between the Republican party, including a lot of those Republicans who went along with the original proposal? 

WOLFFE:  Well, they can pick off the remaining sort of moderate centrist northern Republicans who are out there, the handful that are out there.  But they have really got—

(CROSS TALK)

WOLFFE:  That‘s all you need to get to 60.  But the difficult thing is, what concessions can they get out of this car industry?  Remember, if they don‘t come up with a credible plan—hard to believe we‘re talking about 17 billion dollars and still no credible plan.  But if they can come up with a credible plan, they don‘t have to pay back the money.  They may have a future.  Although, let‘s face it, nobody seriously expects car sales to pick up by March. 

SHUSTER:  Go ahead, Ron.

BROWNSTEIN:  In a sense, this was a victory for Obama, because it does allow them freedom to reshape it.  But with that opportunity comes the responsibility to do so.  And ultimately, this is going to require some concessions from auto workers.  And you saw today, Obama in his comments about the deal, emphasizing that he didn‘t want to go too far in that direction, that he wanted to focus more on management changes and improvement in the way that they run the company. 

He is going to have to, at some point, bite the bullet here, and face the UAW in the eye, and ask for some things that a Democratic president doesn‘t want to probably ask the UAW for in the first quarter of 2009.  So it does have the opportunity here.  There is a responsibility that goes with it as well. 

SHUSTER:  In the mean time, it is so interesting to see him playing the role of, hey, I‘m on the side of workers, as he did he today when he talked about restructuring.  Watch.

(BEGIN VIDEO CLIP)

OBAMA:  There are going to be some painful steps that have to be taken.  I just want to make sure that when we see a final restructuring package, that it is not just workers who are bearing the brunt of that restructuring. 

(END VIDEO CLIP)

BROWNSTEIN:  Right, a very different focus than Bob Corker in the Senate or even President Bush.  But he is ultimately going to have to ask for something from those workers as well, if you‘re going to have a viable package that goes forward.  That won‘t be an easy conversation for this administration to have. 

HARWOOD:  Hey, David? 

SHUSTER:  Go ahead, last word, John, real quick. 

HARWOOD:  The acid test is going to be whether Shuster, Brownstein and Wolffe will buy American cars at the end of this process. 

SHUSTER:  No promises on that.  John Harwood, thank you very.  Richard Wolffe and Ron Brownstein, thank you all.  We appreciate it.  Good to see all of you.  Happy holidays.  Up next, loaded words.  One journalist calls the president elect a, quote, tolerant, rational sounding sort of bigot.  We‘ll talk to him when 1600 returns right after this.

But first, it may have happened days ago, but the shoe toss heard around the world is still ripe for material for the late night comedians. 

(BEGIN VIDEO CLIP)

JAY LENO, “THE TONIGHT SHOW”:  The economy is in rough shape.  It‘s rough.  People are standing behind President Bush just to get the free shoes.  That‘s how bad it is. 

(END VIDEO CLIP)

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE.  Tonight, we are inaugurating a new segment, the Grill.  This is where I cross examine, interrogate and otherwise give the third degree to our guest of choice.  Tonight, an inaugural controversy; Barack Obama created an uproar this week in the progressive community when he asked Pastor Rick Warren to deliver the invocation at his inauguration.  Warren was a vocal supporter of California‘s Prop 8 ballot initiative, outlawing same second marriage. 

Here‘s what tonight‘s guest has to say about it, quote, “gays and lesbians are angry that Barack Obama has honored Warren, but they shouldn‘t be surprised.  Obama has proven himself repeatedly to be a very tolerant, very rational sounding sort of bigot.  He is far too careful and measured a man to say anything about body parts fitting together or marriage being reserved for the non-pedophelic.  But all the same, he opposes equality for gay people when it comes to the basic recognition of their relationships.”

Joining us now to take the heat from our grilling tonight is “Time Magazine‘s” senior writer John Cloud.  John, let me start by saying off the bat, I think it was a very bad decision for the president-elect to give Warren an inauguration platform.  However, here is the Random House dictionary definition of bigot, quote, “a person who is utterly intolerant of any crede, belief or race that is not his own.”  Is Barack Obama utterly intolerant? 

JOHN CLOUD, “TIME MAGAZINE”:  I think that, you know—the reason I -

that‘s the reason I qualified it by saying, you know, he is tolerant sounding. 

SHUSTER:  We can get to the qualification in just a second.  But you called him a bigot in the column.  Again, my question is does he meet Definition of bigot?  You don‘t really believe that, do you? 

CLOUD:  Well, find a better word for me.  This is a person who is—

SHUSTER:  You can say intolerant.  You could say he was intolerant.  You can say he shows poor judgment.  You could say on this issue, he is intolerant.  But bigot is a loaded word. 

CLOUD:  Does the grilling mean that I don‘t get to talk? 

SHUSTER:  I‘ll let you talk now.  Go ahead. 

CLOUD:  This is a person who believes in inequality.  His stated position is that gay people can‘t have equality.  In fact, it is worse than that.  His stated position is that he favors a separate but equal system for gay people, which is ironic, where straight people get to get married, but gay people get something else.  And also, Rick Warren is a person who very recently said that gay relationships were equivalent to relationships between older men and children.  This is the person that Barack Obama says we should come together around.  I think he should be held to a higher standard. 

SHUSTER:  I absolutely agree with you.  I agree with everything you just said.  We played that clip yesterday of Rick Warren.  I thought it was reprehensible.  Again, I think it is astounding and so disappointing to myself and so many other people that Warren would get this platform.  But again, here‘s what Barack Obama said yesterday.  Watch. 

(BEGIN VIDEO CLIP)

OBAMA:  I am a fierce advocate for equality for gay and lesbian Americans.  It is something that I have been consistent on, and something that I intend to continue to be consistent on during my presidency. 

(END VIDEO CLIP)

SHUSTER:  Do you not believe the president-elect? 

CLOUD:  Well, he is not—he is just wrong.  He is not a fierce advocate for equality.  Equality means equal marriage rights.  He is opposed to equal marriage rights.  So on its face, it is not true. 

SHUSTER:  So just because he opposes marriage rights, then therefore when he says that he is a fierce advocate for equality for gay and lesbian Americans by supporting visitation, insurance, rewriting the laws in order to give them equal rights, except for a religious or even perhaps civic definition of marriage, therefore he is being inaccurate and misleading by portraying himself as favoring gay rights? 

CLOUD:  He is obviously not in favor.  Equality is equality.  You can‘t say, we‘re going to pull out most of it, except for the word.  That is the definition of separate but equal.  That is why I used the term bigot.  That‘s also why I compared him to Richard Russell, who was a senator from Georgia in the civil rights era.  He was considered to be, just like Obama, very temperate and he wasn‘t a rabble rousing sort of racist.  He wouldn‘t race bait.  But in fact, he defended segregation and he defended inequality throughout his career. 

Barack Obama has defended inequality in marriage throughout his campaign.  He continues to do so.  Then to add insult to injury, he picks someone to pray at his inauguration who believes that relationships that gay people have are no different, equivalent to relationships that a brother and a sister would have. 

SHUSTER:  I agree with you, John.  And again, I think it is reprehensible that Warren would be there.  I just think that, in hindsight, when you use the word bigot and apply it to Barack Obama, it really sort of diminishes just how or bigotry is and the number of real bigots that out there. 

In any case, John, we do appreciate you coming in.  Welcome to the Grill.  You‘re always welcome back.  We appreciate you playing with us. 

CLOUD:  Sure, thanks.

SHUSTER:  I‘m David Shuster.  That‘s the view from 1600 PENNSYLVANIA AVENUE tonight.  Thank you for watching.  “HARDBALL” with Chris Matthews starts right now.

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