updated 2/11/2009 9:26:14 AM ET 2009-02-11T14:26:14

Guest: Eugene Robinson, Michael Smerconish, Sen. Arlen Specter, Sen. Susan Collins, Steven Pearlstein, Joan Walsh, Lynn Sweet

High: The Senate passes the economic stimulus bill and hands it off to a conference committee to reconcile with the House version.

Spec: Politics; Economy

CHRIS MATTHEWS, HOST:  The Senate votes yes, the market says no.

Let‘s play HARDBALL.

Good evening.  I‘m Chris Matthews.  Leading off tonight: Big numbers, very big numbers.  First President Obama‘s jumbo economic plan.  The Senate today agreed by a squeaker to an $838 billion version of the plan.  The vote was 61 to 37.  Again, just three Republicans voted with the president, three Republicans voting for a $838 billion plan.  That‘s a small number voting for a big number.

The president himself was back on the road, taking his case outside of Washington to Ft. Myers, Florida, a place that‘s been wracked by housing foreclosures.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  By the way, I just want to announce that the Senate just passed our recovery and reinvestment plan.


OBAMA:  That‘s good.  So that‘s good news.  That‘s good news.  That‘s because—that‘s good news.


MATTHEWS:  Well, as you can see, the president certainly seemed to have the public‘s support out there.  A new CNN/Opinion Research poll shows, by the way, that 76 percent of those polled like the job Mr. Obama is doing, over three quarters support across the country.  A Pew Research Center poll has the president at 64 percent.  Now, compare that to the Pew‘s numbers for Congress.  Congressional Democratic leaders get a 48 percent approval rating—that‘s positive—while Republican leaders are down in the negative territory at only 34 percent, about half the president‘s numbers.  So the Republicans are doing about half as well as the president.

But despite the president‘s backing from the public, he got just three Republican senators, as I said, to vote for what he calls his urgent recovery bill.  We‘ve got two of those Republicans senators with us tonight, Susan Collins of Maine and Arlen Specter of Pennsylvania.  Let‘s find out how much slack they‘re going to give the Democrats in shaping the final recovery bill.

Now back to those two big numbers.  The new Treasury secretary, Timothy Geithner, today outlined an overhaul of the government‘s plan to rescue the banking system.  The total cost could rise to as high as $2 trillion—that‘s trillion with a T—in public and private funds.  But who really gets this thing?  Who really understands this thing?  Certainly not the stock market.  That‘s for sure.  The moment Geithner began to speak, the Dow began to fall, and that‘s a bad sign.  By the close of the day, the Dow Jones average had fallen 382 points and it‘s now below 8,000 points, which is has become a very interesting floor, we thought, on the stock market.  We‘re going to talk about that and what the plan is and what it might do and what it‘s supposed to do.

Plus: Last night, President Obama showed us a hint of Jack Kennedy as he elegantly worked his premier nighttime press conference, and today he channeled, you might say, Bill Clinton, showing enormous empathy for people being hit hard by the economy.  But does this make him a force with other politicians?  I‘m not sure.  Let‘s nail it with the “Politics Fix” tonight.  Can he convey the support from the public to the powerhouse on Capitol Hill?  Can he get people to follow him on tough questions like the economy?

And what‘s wrong with these pictures?  Not a thing, except three different parties are now competing for the rights to that picture.  We‘re going to have that fight for you in the “Sideshow” tonight.

We begin, however, with two of the three Republican senators who voted for the economic recovery plan, Susan Collins of Maine and Pennsylvania Senator Arlen Specter.  Let‘s go to Susan Collins.  Senator Specter is there.  I‘m going to ask you both—you met today, apparently.  What are your conditions for the final package?  You first, Senator Specter.  What conditions have you set in your own mind for what you will accept in the conference report on the economic recovery package?

SEN. ARLEN SPECTER ®, PENNSYLVANIA:  The Republican moderates worked it out at $780 billion.  That represented a $110 billion cut.  And that‘s the arrangement, and that‘s the arrangement I expect to have followed.

MATTHEWS:  Susan Collins, Senator, did you expect the House Democrats led by Nancy Pelosi to go along with the Senate version you agreed to?

SEN. SUSAN COLLINS ®, MAINE:  Well, I‘m certain that they‘ll want some changes, but I think it‘s important to realize that it‘s not just the three Republican moderates who felt that the bill passed by the House was too big.  It was a large group of centrists, 14 Democrats, as well, had problems with the amount of spending and worked very closely with us to bring that spending level down.

MATTHEWS:  What did you both think—Senator Specter first—about the president‘s commitment last night to try to put more education money in the final package than was in the Senate version today?

SPECTER:  Well, I think we have already struck the bargain—that is, as far as I‘m concerned.  Look, Chris, this is a very tough matter and we swallowed a big bitter pill, and we did this only because the economy is in such perilous shape and the current recession may go into a full-scale depression like 1929.  And when we worked this through, we went as far as we could and we structured it very, very carefully.  And there are a lot of people who are objecting to it.

Fortunately, the Chamber of Commerce, a very strong Republican conservative organization, agrees that this is necessary because of the perilous economic situation and because it does a lot to rebuild America and because a substantial part of it involves tax cuts.  But if you—if somebody wants to restructure the arrangement, they may end up with no arrangement at all.

MATTHEWS:  Wow.  Well, let me ask you, Senator Collins, about the call by education groups for more education spending than the Senate version allowed for, more for school construction.  Do you think there‘s no give there from your point of view on that?

COLLINS:  Chris, first of all, there is—there are billions of dollars in additional education spending in this bill, $13.9 billion for Pell grants, $13 billion for special education, $10 billion for Title I.  Plus, there‘s a fund that governors can tap into, which is $39 billion, that can be used for education.  So there is a vast sum of new funding for education programs in this bill.  It‘s not that education has been slighted by any means.  It‘s literally tens of billions of dollars in new funding flowing to education.

SPECTER:  Can I give you a simple illustration?  The Head Start from the House had $2 billion.  And we put up $1 billion.  So people come and say, Well, you cut it a billion dollars.  Well, we didn‘t.  If we hadn‘t struck the bargain we did, Head Start would have gotten zero.  So we added a billion dollars to it.  And we went along way in coming a $780 billion figure with tax cuts and spending, and that‘s where we expect it to stay.

MATTHEWS:  Well, let‘s go back two weeks, Senators, if we can, to the halcyon days or the very optimistic days of the inaugural period.  There was talk then of possibly an 80-vote Senate majority for the stimulus package.  What happened to that?  How did that come apart, Senator Specter?

SPECTER:  Well, there are many people who want to assert a party line.  Not one Republican in the House of Representatives supported the bill.  On the Senate side, there is pretty much the same attitude.  Look here, we didn‘t follow the charm and charisma of President Obama, we did this because the economy needs it and because America needs it.

But there are a lot of people who want to assert a very rigid political philosophy, and I think we crossed the line because of the need to put party second.  John Kennedy put it best of all when he said years ago sometimes party asks too much.  There‘s no Republican or Democratic way to solve this problem, but there‘s an American way.  And we did the best we could, and we‘re going to stick with it.

COLLINS:  I think...

MATTHEWS:  Senator Collins, does the Speaker of the House know who she‘s dealing with?  Does she know you senators, you three Republicans especially, are going to be as tough as this as you are?  Does she know what she has to deal with here, not just Steny Hoyer and the education lobby, but deal with you folks?

COLLINS:  I certainly hope that the House will see our efforts as constructive.  As Senator Specter mentioned, without our efforts, there would be no bill.  The bill would be caught up in a filibuster.

One—you asked what happened.  One of the things that happened is this bill became a Christmas tree upon which members hung their pet programs.  They put on spending that had nothing to do with creating jobs, turning our economy around, or providing relief to the American taxpayers.  And we worked very hard to come up with a bill that was more targeted, more effective, as well as bipartisan.

So I understand the friction that always exists between the House and the Senate.  That‘s nothing new.  But I would hope that our colleagues on the Democratic side of the aisle in the House would talk to some of the centrist Democrats on the Senate who believe exactly as we do and who have joined with us in crafting this compromise that has allowed this stimulus bill to move forward.

MATTHEWS:  Well, here‘s the president today.  I want you both senators to respond.  Here‘s President Obama down in Ft. Myers, Florida, today.  I‘d like you to respond to what he said.


OBAMA:  We‘ve got a good debate.  That‘s part of what democracy is all about.  But the time for talk is over.  Folks here in Ft. Myers and across America, they need help, they need action, and they need it now.


OBAMA:  Americans I‘ve met understand that even with this plan, our economy will likely be measured (ph) in years.  For our TV audience, somebody said I had eight (ph), which we‘re not clear about yet.


MATTHEWS:  Let me ask you—I‘m not sure that‘s something to respond to.  Let me ask you, Senator Specter, about the Republican Party you and I grew up with.  It used to be very strong in the Northeast.  Every Northeastern state had at least one Republican moderate senator.  And now you‘re almost the last of the Mohicans, you and Senator Snowe and Senator Collins.  Has the party got to change?

SPECTER:  Oh.  I believe that there has to be more accommodation to different points of view and not to assert a philosophy which says we‘re not going to yield even in the face of enormous problems.  Our Republican colleagues in the Senate say that, Well, a better deal could have been structured.  But we urge them to come in as part of the negotiating process.

I wasn‘t looking for a role as a negotiator.  Senator Collins and I did it only because quite a number of other Republican senators moved away.  So I think there has to be more focus on the underlying problems and a willingness to solve them in a way which requires an accommodation.  Everybody can‘t get everything they want.

MATTHEWS:  Well said.  Thank you very much, Senator Arlen Specter of Pennsylvania, Senator Susan Collins of Maine, who are two of the three key people in putting together this coalition to pass this bill.

Coming up: President Obama ratcheted up the media campaign to sell his economic recovery plan.  He was down there making a case in Florida today.  Let‘s ask how he‘s doing with some experts coming up, and how does Obama stack up versus his predecessors.  Kennedy was pretty good at press conferences.  Reagan was good with the prepared speech.  And you couldn‘t beat Bill Clinton when it came to empathy.  But let‘s watch this new guy and how well the new president‘s doing in that company.

We‘ll be right back from Florida.  You‘re watching HARDBALL, only on



OBAMA:  We cannot afford to wait.  We can‘t wait and see and hope for the best.  I believe in hope, but I also believe in action.



MATTHEWS:  Welcome back to HARDBALL.  President Obama campaigned today down in Florida and he took his economic recovery program on the road.  He first made his pitch to the struggling town of Elkhart, Indiana, a place that‘s hit rock bottom with a 15 percent unemployment rate.  Then he returned to Washington to field tough questions—well, somewhat tough—in his primetime press conference.

Today he brought his sales pitch to Ft. Myers, Florida, where the foreclosure rate is the highest in the country right now.  On Thursday, he‘s going to Peoria.  Will it sell in Peoria?  There‘s an old question from John Ehrlichman.  It‘s going face to face with real suffering.

Watch today as he talked to a woman in real trouble.


UNIDENTIFIED FEMALE:  I have an urgent need on employment and homelessness, a very small vehicle for my family and I to live in.  We need urgent—and housing authority have two years waiting list, and we need something more than the vehicle and the parks to go to.  We need our own kitchen and our own bathroom and—please help.

OBAMA:  Well, I—listen, I—what‘s your name?  What‘s your name?

UNIDENTIFIED FEMALE:  It‘s Henrietta Hughes (ph).

OBAMA:  OK, Ms. Hughes.  Well, we‘re going to do everything we can to help you, but there are a lot of people like you.  And we‘re going to do everything we can, all right?  But the—I‘ll have my staff talk to you after this—after the town hall, all right?  All right.


MATTHEWS:  Well, let‘s bring in our MSNBC political analysts Eugene Robinson of “The Washington Post” and Michael Smerconish, who‘s a radio talk show host up in Philadelphia, as well.

Let me go to Gene.  These things aren‘t screened.  They‘re not scripted.  The president of the United States is risking, I guess, embarrassment, if you want to call it, but he‘s meeting real people and they‘re asking for help.


first of all, that‘s a change in forum from what we‘ve had over the last eight years.  We‘ve had town halls but with pre-selected audiences, essentially.

Second, that was really quite a moment, wasn‘t it.  I mean, in traditional political terms, I‘d have to say that these field trips that the president has taken look like an enormous success in that he‘s out there talking to real people.  He‘s showing that he‘s on the job that they sent him to do, which is to help people.

MATTHEWS:  How does this arm him to get done something?

ROBINSON:  Well, that‘s the question.

MATTHEWS:  How does it help?

ROBINSON:  Theoretically, I think, it‘s supposed to create pressure on the outside that can be brought back to bear on Congress to do what he needs done or what he feels needs to be done.  Is there time for that to work?  Is that going to get him the kind of stimulus he ultimately wants?  He wants more education money in it.  Clearly, from the interview you just did with Specter and Collins, their initial position is their way or the highway.  So this is—this is going to be a tough fight, and I‘m not yet sure he‘s going to get everything he wants.

MATTHEWS:  Michael Smerconish, who is he winning over with this? 

Because he didn‘t win any Republicans in the House.  He‘s got three Eastern

Republicans, the two people from Maine, and of course, Senator Specter, who

you know so well in Pennsylvania.  He‘s got sort of those—as I call

them, the last of the Mohicans on the East Coast who are Republicans.  But

but is he moving the middle of the country?  Is he moving the conservatives, the middle of the country politically, by showing the vast need for action?


You know, you introduced that package by saying the president campaigned today in Ft. Myers, Florida.  I don‘t know if that was deliberate on your part, but I think it was a very accurate statement because it‘s as if the campaign didn‘t end and he‘s on the trail, except now he‘s the executive in charge.  And I think it‘s wise and I think it will and is paying dividends, if not in the House and the Senate, certainly among middle-of-the-road folks all across the country.

Look at the polling data that you led with tonight.  Today, on my radio program, I had the president of Gallup.  They say 67 percent of Americans approve of the way in which he is approaching this task.  So, it would seem as if the GOP at this stage is out of step, and perhaps needs to get in step. 

MATTHEWS:  Well, you know, and something I said early on after the election, I think, people—it‘s not a partisan assessment.  We have only one president.  I think Specter said it well, too.  There‘s only one game in town right now.  You are going to get aboard that game or you‘re going to say no. 

And the—the option of saying no means nothing gets done.  And that‘s a fact. 


And—and Specter made that clear in that—in that interview. 

MATTHEWS:  Right. 

ROBINSON:  And getting nothing done is a tremendous failure, and potentially a catastrophic failure, for the economy, according to all the economists. 


MATTHEWS:  Yes.  I think—I think every—I most economists know that, to some—the government has to start spending money, to some extent, to make up for the lack of consumption by the consumer, the lack of investment by the business people. 

Let‘s take a look at this.  It‘s another one of those unexpected exchanges between the president and a young man who is working at McDonald‘s today.  We all saw it and had different reactions to it.  Let‘s watch this again. 


UNIDENTIFIED MALE:  Oh, this is such a blessing to see you, Mr.

President.  Thank you for taking time out of your day. 


UNIDENTIFIED MALE:  Oh, gracious God, thank you so much. 

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  All right.  What‘s the question? 


UNIDENTIFIED MALE:  All right, Mr. President.  My name is Julio Osegueda (ph).  I‘m currently a student at Edison State College in my second semester. 

And, OK, I have been at the same job, which is McDonald‘s, for four-and-a-half years because of the fact that I can‘t find another job.  Now, with the fact that I have been there for as long as I have been there, do you have any plan or any idea of making one that has been there for a long time receive any better benefits than what they have already received? 

OBAMA:  But the thing that I‘m really interested in is—you say you‘re going to school.  What are you studying? 

UNIDENTIFIED MALE:  I‘m looking to study and major in communications, hopefully being a broadcaster or a disc jockey. 

OBAMA:  Well, you sound like you‘ve got good communication skills. 

UNIDENTIFIED MALE:  Thank you so much. 

OBAMA:  So—so part of what we want to do is we want to make it easier for you to afford going to college by giving you this refundable tax credit for your tuition, because young people like Julio, who have that much enthusiasm and that much energy, we‘ve got to make sure that we are giving them a pathway so that they can educate themselves and go as far as their dreams take them. 


MATTHEWS:  So, here‘s what‘s happening, guys.  I think the president‘s getting throughout with real people of all kinds of situations and backgrounds, all kinds of people, as we just saw, poor people, people with other kinds of problems.

And he‘s, I think, finding something he didn‘t expect.  Nobody knows what the future holds.  He didn‘t know that kid was going to stand up there and talk about McDonald‘s.  He‘s obviously got a nervous condition.  The kid‘s very excited by what‘s going on and being on the spotlight like that. 

But the important thing is, the American people are now looking at themselves, instead of looking at Washington. 

Michael, it is so fascinating.  It‘s like what you do every day on the radio.  This is the tire hitting the road.  This is the reality check that the country needed.  The question is, does it change the political equation from, who‘s got the most interesting ornaments on their vehicle right now, to, do we need a vehicle? 

SMERCONISH:  All right.  I...

MATTHEWS:  And it seems to me that it does change the question, in terms of the stimulus bill.  Are we going to have something or nothing? 

SMERCONISH:  I think I have got it—I think I have got it on both you and Gene in this one, because I—I‘m the only McDonald‘s alumnus among the three of us.


SMERCONISH:  And I can still run the deep fryer, if necessary. 

What I took away from that is something that Gene Robinson said, which is, you can tell it‘s unscripted.  I mean, these are legitimate moments that he is having.

And, by the way, even if someone is hostile out there on the road, not in a physical sense, but in a verbal sense, it will still bode well for him.  He‘s so good on his feet.  And what most comes out of this exchange and that press conference last night is confidence, because I think people are scared to death out there.  They don‘t understand it.  I don‘t understand it. 

And we want to know that he does understand it.  And he looks like he does. 

MATTHEWS:  And the question, of course, then, is, is what‘s going do happen?  That woman out there needs—the first woman out there who needs a house... 

ROBINSON:  Right.  Right. 

MATTHEWS:  ... you can‘t get more basic than shelter.

ROBINSON:  She needs a place to live, other than her car, yes.  It‘s just—it‘s an amazing story.

MATTHEWS:  You know what Ronald Reagan would have done?  I‘m not knocking Reagan.  I liked him in many ways. 

He would have said:  Give me your name.  I will write you a check. 


MATTHEWS:  He would have taken it as a personal problem. 

ROBINSON:  Mm-hmm. 

MATTHEWS:  But this president is a liberal Democrat, and he has to look at it in a different sense.

ROBINSON:  Mm-hmm. 

MATTHEWS:  He has to say, what does this tell me about public policy?

ROBINSON:  Right. 

MATTHEWS:  What have we got to do as a country for these kinds of people with these kinds of problems? 

ROBINSON:  Right.  But he also said, let me—let‘s get your name and let me talk to the staff. 


MATTHEWS:  But, then again, he is doing it ad hoc. 



ROBINSON:  Well, it‘s incumbent.  I mean, if you‘re the president and you hear that from that woman at that event, I think you need to look into her situation.

MATTHEWS:  Two-point-three million people facing foreclosure right now. 

ROBINSON:  Yes, I know. 

MATTHEWS:  Two-point-three million people could have been standing at that...

ROBINSON:  But, you know...

MATTHEWS:  ... at that town meeting today, saying something like that to the president. 

ROBINSON:  And the—and the image that you take away is, here‘s a guy who‘s working on your behalf.  He‘s a guy—here‘s a guy who‘s working for the ordinary citizen, who‘s working to get things done for them and to make their lives better.  That is the image... 

MATTHEWS:  Well, to make your point in a different way, Michael...

ROBINSON:  ... that you get.

MATTHEWS:  ... I have always said to people I know and care about, you should always wait tables at some time in your life, because, unless you have waited tables, and waited with—for customers, with all their different needs, you don‘t know nothing, and you don‘t have any humility. 


MATTHEWS:  But, Michael, let me ask you about—you are a

conservative.  You‘re a fiscal conservative.  And you saw the humanity on -

on display with that young man and that woman today. 

Does that change your politics?  Does that change the table at all in terms of where fiscal conservatives stand?  Are you still opposed to spending this kind of money, people like you? 

SMERCONISH:  There‘s a legitimate philosophical divide in the country. 

And the president addressed this last night. 

He‘s talking about the economists who signed on to that Cato advertisement that has run in every major newspaper in the country.  And, you know, there‘s a legitimate argument to be made that less government and tax cuts are the way to go. 

But I—I yield to the expertise of what appear to be the majority of economists, who say, we have got to spend, and we have got to spend quickly.  So, it doesn‘t sit well with me, but I‘m becoming convinced this is necessary, and it‘s necessary immediately. 

And one final point.  You just interviewed Arlen Specter.  He is laying it all on the line, against his interests, because, Chris, you know the Republican Party in Pennsylvania has had an exodus of moderates, those who used to keep him a victor in primaries.  They‘re gone. 

He comes up in 2010.  You know that well.  And the people who are beefing about Specter are the conservatives.  And they‘re the ones who are left in the primary to call the shot.  So, it‘s dicey for him.  And I respect him for putting it on the line. 

MATTHEWS:  Yes.  I think—I think you may be right exactly.  And, also, we don‘t know about the cosmos and how it shifts.  We don‘t know what it‘s going to look like. 

If this economy continues to go downhill, I think people who have shown empathy with people in trouble will be ahead of the curve. 

ROBINSON:  Mm-hmm. 


ROBINSON:  I agree.  I agree. 

And, in a state like Pennsylvania, you know, that could cut both ways for Specter.


ROBINSON:  But—but Michael is right about the party... 


MATTHEWS:  Pennsylvania always cuts both ways. 

ROBINSON:  Well, it—it does. 


ROBINSON:  That‘s the point. 


ROBINSON:  But—but—but Michael is right about the party hierarchy. 

MATTHEWS:  He‘s right.

ROBINSON:  I mean, the moderates are gone. 

MATTHEWS:  He‘s right about that.

Anyway, thank you, Gene Robinson.  Thank you, Michael Smerconish, who is always in touch with the people. 

Up next:  The Obama administration‘s media blitz today featured a technique made famous by Monica Lewinsky‘s lawyer.  It‘s not a bit of trivia that you hear often on this show, but we‘re going to bring it back.  Wait until you catch this connection. 

You‘re watching HARDBALL, only on MSNBC.  


MATTHEWS:  Welcome back to HARDBALL.  Time for the “Sideshow.”

First up:  What‘s in a photo?  Well, this was the iconic image of the 2008 election.  You have got to admit that.  There it is.  It managed to say everything there was to say about the Obama campaign in a single one-syllable word: hope. 

Shepard Fairey, the street artist who created that poster, based it on this 2006 photo taken by a photographer for the Associated Press.  Well, the Associated Press is claiming ownership of the image.  And the artist, Fairey, is now going to the courts to get a judge to say it isn‘t true. 

Well, meanwhile, the photographer himself who took that picture for AP says he personally owns the copyright to the picture, though he admits he is proud of the fact that the artist did so much great work with that poster. 

Well, the great thing about money, I like to say, is that it‘s arithmetic.  If you want to divide up the money in this case for who gets credit for that poster, it‘s easy to do. 

Time now for the “Big Number.” 

This morning, presidential Press Secretary Robert Gibbs continued his boss‘ around-the-world ‘I search for you‘ public relations campaign with the president‘s big economic recovery bill.  Watch him go. 




GIBBS:  ... plan that meets—meets the size and the scope of the challenges that we face. 


GIBBS:  We know that, if we put money back in the pockets of middle-class families, that they will spend that money and hopefully get this economy moving again. 


GIBBS:  The economists will tell us that, if we wait too long, we will miss our opportunity to get our economy going. 


GIBBS:  We have to have an economic stimulus and recovery plan that is big enough to meet the size of those challenges. 


GIBBS:  The American people need to have confidence that their taxpayer money is going to go to getting this economy moving again. 


GIBBS:  It is time for Washington to act and get along when doing it. 



MATTHEWS:  That‘s right.  Obama‘s man did all six morning shows, including “MORNING JOE,” this morning.  We call that the full Ginsburg, after Monica Lewinsky‘s lawyer, William Ginsburg, pulled off a similar feat, explaining what some might call that other stimulus issue back in ‘98. 

This time, our man Gibbs hit all six morning shows, all six talk shows in the a.m.—tonight‘s “Big Number.” 

Up next:  President Obama‘s economic recovery bill passes the Senate today by a single vote.  And now the president‘s treasury secretary unveils his plan to attack the banking crisis. 

And it has some extraordinary numbers attached to it.  Get this one: a trillion dollars in Federal Reserve lending.  That‘s just a part of it.  Would it save the financial industry?  Is it going to help the average American?  We‘re going to talk about that in the next—we‘re going to keep it clear and simple. 

You‘re watching HARDBALL, only on MSNBC.  


MARGARET BRENNAN, CNBC CORRESPONDENT:  I‘m Margaret Brennan with your CNBC “Market Wrap.”

A major sell-off, after Treasury Secretary Tim Geithner unveiled the outlines of the Obama‘s administration‘s new bank rescue plan.  But traders wanted more.  And the Dow Jones industrial average plunged 383 points, closing below the 8000 level.  The S&P 500 tumbled 42 points, and the Nasdaq lower by 67. 

Treasury Secretary Geithner outlined a plan that could commit up to $2 trillion in public and private funds to unfreeze credit markets and buy up the troubled assets of banks.  However, investors complained that the plan was short on specifics. 

Meantime, General Motors announced it will eliminate another 10,000 salaried jobs and cut the pay of most remaining salaried workers. 

And Wal-Mart says it will cut up to 800 jobs in its Arkansas headquarters.  But the world‘s largest retailer and the country‘s largest private employer says it will continue to hire thousands of workers as it opens new stores.  The reorganization is just at its headquarters. 

That‘s it from CNBC, first in business worldwide—now back to Chris and HARDBALL. 


TIMOTHY GEITHNER, U.S. TREASURY SECRETARY:  Our plan will help restart the flow of credit.  It will help clean up and strengthen our banks.  And it will provide critical aid for homeowners and for small businesses.

And, as we do each of these things, we will impose new, higher standards for transparency and accountability. 


MATTHEWS:  Welcome back to HARDBALL. 

That was Treasury Secretary Tim Geithner today on the Obama administration‘s plan to restore stability to banks and to reignite lending.  It could cost up to $2 trillion in various forms.  But will it work, and how‘s it going to work? 

With us now is “The Washington Post” columnist Steven Pearlstein, someone who can speak and make it understandable. 

Sir, today, the president got the—the U.S. Senate to narrowly—by a squeaky vote of one vote extra, 61 votes, they got the approval of this big $800 trillion plan -- $899 billion plan—to create stimulus in the economy, get people getting tax cuts, getting job money to spend. 

OK.  That gets spending going on out there.  Now, what did Geithner say today about getting banks to start making loans available?  What did he do today that suggests that that can start happening? 

STEVEN PEARLSTEIN, COLUMNIST, “THE WASHINGTON POST”:  Well, you have got divide this, I think, into—into four separate problems. 

One problem is that there are a lot of banks that, either now or in the near future, won‘t have enough capital to operate.  Banks need—need some capital that the shareholders own in order to borrow more money from depositors, and then lend it all out.  And there are some banks that are going to be undercapitalized.

And, so, one of the things that they‘re going to be doing is continuing what they have done in the past, which is to put capital into banks that need it.  They‘re going to have more restrictions.  OK, that‘s the easy part. 

Second part, a little bit easier, new loans.  Banks, for many, many years now, have not made loans to college students that want it, to small businesses, to car—car—people who buy cars.  They don‘t make these loans.  They don‘t hold them.  They turn around and they package them and they sell them.  They sell them to investors and a market.  

And those securitized—markets with securitized products are dead.  They no longer are operating.  And, so, the banks can make one loan, but, if they can‘t sell it, get the money, and make another one, there‘s not much lending they can do anymore.  They have got to get those markets started again.

So, the proposal there, which we have talked about before, is to have the government—the Treasury take a little bit of taxpayer money, say a dollar, send it over to the Federal Reserve, which will print nine dollars.  They‘ll just print.  They‘ll take that 10 dollars and they‘ll buy up some of these loans from banks. 

These are only new loans, OK?  So they‘re not bad loans.  They‘re not toxic.  Presumably people learned their lesson.  They‘ll make good loans this time.  They‘ll buy up those loans and free up the banks to keep making more of those consumer loans, car loans, college loans and commercial real estate loans.  That‘s the second program.  That‘s a trillion dollars. 

Third part, that‘s the hard part, Chris.  What to do about all those bad loans and those packages of bad loan that is are still on the books of the banks.  And that‘s where Wall Street was a little disappointed, because they wanted more details.  But what the secretary said is, look, we‘re going to take some of the taxpayer money, which is borrowed, and they‘re going to try to attract some private money into pools, and have those pools buy some of those assets at an arm‘s length transaction and hold them.  And hopefully, over time, we‘ll make money because they‘ll buy them at a depressed price and eventually they‘ll either sell them at a higher price or all those loans will come due.  They‘ll be paid back and the people who buy those things will have made money. 

The fourth part—

MATTHEWS:  OK, let‘s get to the—let‘s just go to the first—before you get to the fourth, I want to get to this question: is there anything in this package that gives you confidence, Steve, that starting in a month or so, or in a fairly foreseeable future, people will be able to get college loans, will be able to get loans to buy a car, small business will be able to get loans?  Is that going to work?


MATTHEWS:  Or do you still have to deal with these bad assets issue to get this thing to work? 

PEARLSTEIN:  Let‘s go to your question.  Will that work with the Federal Reserve setting up these facilities?  It has already worked in the case of something called commercial credit, commercial paper.  They‘ve already done that with that market, which had frozen.  It will work.  The new loans are going to be well made.  We know how to do this.  The Federal Reserve knows how to print money.  It‘s not that hard.  That will work. 

The federal government will essentially be the banker of first resort for all of those kinds of loans, until those markets can restart and people get confidence and other people then will start to buy those instruments, rather than just the Fed buying them. 

MATTHEWS:  OK.  Do you think—excuse me.  Do you think, being a

watcher of this from both ends, from the street end and from the government

end, do you think the people in the White House will now realize they did -

there‘s something missing here?  The people in the Treasury Department will realize there‘s something they didn‘t do today.  The market wants to hear something.  They want to hear the fact that there‘s going to be an infusion of federal dollars, taxpayer dollars, to buy these bad—or help people buy these—what they‘re called toxic assets, these bad mortgages? 

PEARLSTEIN:  OK, Chris, Wall Street is not going to be happy until the Treasury fills up, you know, a thousand tanker trucks with cash and drives it up to Wall Street and unloads it in their loading docks, and takes the toxic assets off.  OK?  They‘re never going to be happy.  And to use as a criteria that the traders up in Wall Street, or the executives up on Wall Street aren‘t happy yet, well, they‘re never going to be happy, Chris, until you solve all their problem.  That is not our job to make them happy, frankly. 

MATTHEWS:  My worry is, like everybody else who has some stock, I‘m worried when this thing gets below 8,000.  I‘m afraid when it gets below 8,000, it is going to keep dropping.  That‘s my fear.  What do you think? 

PEARLSTEIN:  What I think, Chris, is what drove those markets down today is exclusively financial stocks, because those guys were hoping for those tractor trailers full of freshly-printed money, coming up to the loading dock.  And Geithner said, you know what?  It isn‘t going to be that easy, guys.  And by the way, how about saying, A, I‘m sorry, B, thank you, and C, what is your plan for this? 

So far we have heard nothing from them, a big goose egg on what their plan is.  These guys are hunkered down and they‘re contributing nothing.  Their leadership is nonexistent on this issue.  So for them to complain about Geithner, well, excuse me, but I don‘t ascribe much importance to that. 

MATTHEWS:  I love your attitude, sir.  Stephen Pearlstein from the “Washington Post,” a man who knows his issues and has the right attitude.

Up next, President Obama gets his economic recovery plan through the Senate by a squeaker.  Three Republicans who now hold the future for this guy‘s fiscal planning.  If those three Republicans say no deal after this week, where‘s he at?  That‘s at stake as the politically conscious president goes to the people.  We‘re going to have the politics fix in just a minute. 

How does Barack Obama, the president of the United States, keep three Republicans on base while he wins his whole political party, the Democrats, back to him between now and next week, between now and Washington‘s birthday?  This is HARDBALL, only on MSNBC.


MATTHEWS:  Welcome back to HARDBALL.  Time now for the politics fix with Joan Walsh, who is editor of “Salon,” and Lynn Sweet, the Washington bureau chief for the “Chicago Sun Times.” 

Lynn, it looks to me, as you were just saying before we go on the air, that Barack Obama is doing what so many recent presidents have done.  They get here.  They take the job.  They take the oath.  They leave town quickly and say they‘re running against Washington again. 

LYNN SWEET, “THE CHICAGO SUN TIMES”:  He still is.  Listen, in Ft.  Myers, Florida today, you see all too often in Washington what happens is that people think in terms of numbers and statistics.  Well, he is Washington now. 

MATTHEWS:  Here he is in his own words poking fun at Washington. 


OBAMA:  I‘m not going to tell you that this plan is perfect.  I mean, it was produced in Washington.  You didn‘t send me to Washington to do nothing. 


MATTHEWS:  Joan Walsh, Reagan could have said that.  Jimmy Carter said that.  I hate to break your heart, George W. Bush said that.  Is this fair?  He is our government now.  Is he still the tribute of the people beyond the city gates, fighting the evils of the corrupt capital?  Is that a fair image? 

JOAN WALSH, “SALON”:  Yes.  I think it is a very fair image because the Republicans refuse to get the message and the mandate that he was given in November, Chris.  And they‘ve tied their whole party to one idea.  That is we‘re going to be the party of small government, and we‘re going to ignore the economists; we‘re going to ignore everybody who says we need a big, big stimulus to get this economy moving again.  They‘re going to obstruct. 

I think he had a glorious day.  I think he did exactly the right thing.  I think it will help in the long run.  He should keep doing it. 

MATTHEWS:  Let me be truly Machiavellian.  Three US senators, Arlen Specter of Pennsylvania, whose career I‘ve watched over the years—he‘s certainly a centrist.  The two women senators from Maine, Susan Collins and Olympia Snowe, both former staffers on the Hill.  They know politics from the inside out.  Is it possible that the Republican leadership knows damn well they better not get in the way of this train?  They‘re quite happy to release people.  Not that they sat there and said, you three are released.  But they‘re quite copacetic about the fact that three Republicans are making sure this train doesn‘t get stopped, because if it does get stopped, the whole party gets blamed.  Do you think so?

SWEET:  Those three Republicans are more powerful as a trio than if they had—if the Obama team had just some moving targets there. 

MATTHEWS:  Suppose they weren‘t there.  Would the whole Republican party get blamed?  I would say yes. 

SWEET:  Yes.  What Obama did at his press conference last night is basically say that bipartisanship is a long-term goal for him.  He more or less, I think, conceded that this stimulus bill is to important to work on the bipartisan part and to deal away whatever it needs to bring in Republican votes. 

MATTHEWS:  What do you make of the Republican party‘s thinking?  You‘re Mitch McConnell, John Boehner sitting up on the Hill.  It probably doesn‘t bother you one bit that Arlen Specter, Susan Collins, Olympia Snowe have gone out and given the keys to the city to the new president, who is leading the country right now, rather than let him campaign against the walls of the city until they come down, Joan? 

WALSH:  I‘m not sure how happy they are.  I think there‘s still a fight ahead.  I think that from everything Obama has said in the last two days at Elkhart, in D.C. today, in Ft. Myers, he wants some things that Collins, Specter, and Snowe took out of that bill.  He wants school funding.  He wants aid to state.  There is still going to be an interesting battle waged. 

MATTHEWS:  That‘s true.  You know how I know that?  Because in the beginning—you know how I know that‘s true, Joan?  Because at the beginning of the show, they said so.  Susan Collins and Arlen Specter said they‘re not giving an inch.  They‘ basically said, we‘re sticking to their position.  In fact, they‘re talking about a 780 billion dollar bill.  They‘re even slicing it down lower.  They‘re not giving in on education, on school construction, on state and local.  They made it clear on each point when I raised it, they‘re sticking to their number. 

What‘s the conference between the House and Senate about, if one side says we‘re not giving?  What is accomplished? 

WALSH:  I don‘t know.  I think that‘s a really good question.  I saw them say that.  So this battle is clearly not over.  Obama needs to decide whether he‘s going to go after the things that he believes will make a difference in starting the economy.  And he continues to speak for them, even though he knows what‘s in the Senate compromise.  That‘s interesting. 

MATTHEWS:  Joan, are you one of these—are you a fire brand that says, I don‘t care if it brings the house down, I‘m sticking to my positions?  I think people in the House are like that.  I wouldn‘t be surprised if some from the Bay Area are like that, saying I‘m going to win on my position.  I don‘t care if this done come apart. 

WALSH:  You know, you‘re making that sound like a it would be a merely political or tactical point of view, Chris.  I think if someone did that—

I‘m not saying that I‘m endorsing that right this minute.  If someone were to do that, it could also be because they were saying, this bill, as it is, will not help our economy.  If I took my daughter to the doctor tonight and he or she told me she needs X, Y, and Z to make her well, but somehow I got into a compromise over, well, we‘re going to do X and it might not help, but that‘s all we can do, I would fight like hell to make sure they did everything she needed to make her well. 

I think there‘s an analogy here.  I don‘t mean to merely be histrionic.  I think President Obama, not just the House Democrats, President Obama still sounds like a man who wants some of those things. 

MATTHEWS:  OK, we‘ve got a break here.  I‘m sorry, Joan.  We‘ve have to take a break.  Back with you and Lynn Sweet right in a minute.  I‘m sorry. 


MATTHEWS:  Take a look at this great moment on the Capitol Hill steps today.  There‘s Senator Kennedy, came back to vote today.  He‘s obviously battling brain cancer, as we all know.  He came back to vote for the economic recovery plan.  After the vote, he‘s walking out of the Capitol like that.  See that, going to his car, with Vicki ahead of him, his wife. 

Look at this, moments later—you‘re going to see this—there across from him, you are going to see three Republican senators all giving him the go get it.  Watch this.  They‘re all wishing him well.  They‘re all putting thumbs up.  There‘s John with his get tough picture.  Small little vignette there of human kind at work, apart from politics.  Anyway, senators do have respect for each other. 

Lynn Sweet, this question—once you get outside of Washington, things change.  I‘ve long believed—I learned this in politics when I was back then, if you say the economy it helps the Democrats.  If you say the budget, it helps Republicans.  It‘s just the way people think.  You talk about real people with real problems, it helps the party that‘s more sympathetic, the one that‘s out of power maybe, or the one‘s that trying to get something done.  In this case, I think Barack is going to keep going to the country. 

SWEET:  He signaled this during the campaign.  I remember talking to him about this once where he—it was always in their tool kit that if Congress didn‘t go along with them they could go out.  Now, in this case, though, he has to have a very definite result.  He has to be able to keep a few Republican votes in the Senate.  Obama is very pragmatic.  I think he‘s going to be far more willing to deal than his Democrats in the House and Senate. 

MATTHEWS:  Did you notice, Joan—did you notice, he isn‘t that much of a partisan.  He may believe in things deeply, but he‘s not a partisan.  He gave the biggest salute today to Charlie Crist, the governor of Florida.  Did you see that?  He wants to share with anybody who wants to share his cause. 

WALSH:  I think it‘s interesting too, because I agree with Lynn.  I think he went out to two places that did not vote for him.  He‘s having a hard time with some of the Republican leadership, but he‘s going to talk to Republican voters.  Now, I don‘t know who was in that room.  But he‘s going to talk to Charlie Crist, because Charlie Crist wants that stimulus money.  I believed that during the campaign.  He will work with anybody who will work with him.  They may not -- 

MATTHEWS:  Thank you very much, Joan Walsh and Lynn Sweet.  I wish we had more time.  Join us again—they‘ll both with back tomorrow night.  By the way, we‘re back at 5:00 and 7:00 Eastern for more HARDBALL.  Right now, it‘s time for “1600 PENNSYLVANIA AVENUE” with David Shuster. 



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