updated 3/5/2009 2:36:45 PM ET 2009-03-05T19:36:45

Guest: Barney Frank, Michael Isikoff, Hal Sparks, Arianna Huffington, Rick Earle High: Interview with Barney Frank.

RACHEL MADDOW, HOST:  And thank you for staying with us at home for the next hour.

House Financial Services Committee chairman, Barney Frank, will join us in just a moment after this rollercoaster economic day.  If by rollercoaster you mean the rollercoaster that just goes down, down, down.  Michael Isikoff will be here with the details on the new previously-secret Justice Department memos that just got released.  Plus, Arianna Huffington and Hal Sparks will join me here in sunny Los Angeles to assess the “GOP in Exile.”  It is all coming up.

But first, March is coming in like a lion.  The kind of metaphorical lion that brings blizzards to the eastern seaboard and that could reasonably serve as an apocalyptic mascot of financial doom.  Sorry.  The stock market closed below 6,800 today, under 7,000.  A year ago, it was over 12,000.

Driving stocks down was news that we are going to make a fourth try at bailing out a big, boring-sounding company called AIG—once the biggest insurance company in the world.  You know how it seems like a huge deal—it is a big deal—that we bailed out Citigroup for $50 billion and Bank of America for $45 billion.  Well, we have spent triple that already on this company, AIG, and now, as of today, they‘re getting $30 billion more.

The thinking is that AIG is such a huge company.  And part of what it did was provide insurance to the rest of the financial industry.  It‘s such a big company, it‘s so intertwined, that if AIG collapsed—instantaneous worldwide financial kablooie.

Of course, part of the reason that AIG became so big and the means by which they insured the rest of the industry were patently idiotic, defying common sense financial chicanery made possible only because big parts of the financial market were unregulated.  But even though AIG got too big and too interconnected to be allowed to fail through means that maybe ought to put somebody in jail, the fact is, the government thinks they are too big and too interconnected to be allowed to fail.  So, they‘re getting another $30 billion in our money.

Last quarter, even after all the government money that had already been given to AIG, they lost more money than any other company in any quarter in history ever.  They lost more than $60 billion in one quarter.  They lost $500,000 a minute.  And that was with government help.

Now, they‘re going to get $30 billion more.  And we‘ll see what happens.  We‘ll see what happens from the vantage point of a country with a very small stock market.

As you may recall, President Obama released his budget last week, a big, ambitious budget, including some health care reform and middle class tax cuts, and infrastructure and education spending, a budget that did not lie about war spending.  It is a big budget.  It reflects a big change from the Bush administration for a country that in big trouble.

The Republican response?  Well—take it away little known Wisconsin Congressman Paul Ryan.

(BEGIN VIDEO CLIP, FOX NEWS SUNDAY)

REP. PAUL RYAN, ® WISCONSIN:  This is probably the biggest rewrite or transformation of our federal budget since the New Deal.  What surprises me most about this budget though is that they would bring this out in the middle of a recession.

(END VIDEO CLIP)

MADDOW:  That‘s what surprises you about it?

OK, pop quiz here.  Why was there a New Deal?  What was going on in the country that prompted FDR to introduce the big spending activist government New Deal?  Was it that everything was going awesome in the U.S.  economy back then or was it—what was that thing, the great impression, the great profession, the great jam session—something like that?

Of course, you‘d have a New Deal-like budget in a recession.  When else would you have it?

All right.  Your turn, slightly better known Republican Congressman Eric Cantor.

(BEGIN VIDEO CLIP)

REP. ERIC CANTOR, ® VIRGINIA:  What we see in this budget, frankly, is an attempt, again, to try and stimulate the economy through government expenditure.

(END VIDEO CLIP)

MADDOW:  And President Hoover taught us that can‘t work.  Yes.  Did you know they named the shanty towns of poor and starving Americans in the depression after Hoover - Hoovervilles?  A sort of an award for Hoover‘s awesome idea that the government shouldn‘t stimulate the economy in a depression.

OK.  Last try.  Let‘s try out the man known as the other senator from Arizona.

(BEGIN VIDEO CLIP)

SEN. JON KYL, ® ARIZONA:  It‘s terrifying in the policy implications as well as mind-boggling in the numbers.

(END VIDEO CLIP)

MADDOW:  You know, I‘m starting to detect a theme here.  Apparently, the Republican Party‘s consensus about the economic crisis is that they would like to see a scaled-back government effort to keep the recession from becoming a depression.

Joining us now is Congressman Barney Frank, Democrat of Massachusetts, chair of the House Financial Services Committee.

Congressman Frank, thank you so much for coming on the show tonight.

REP. BARNEY FRANK, (D) MASSACHUSETTS:  Glad to.  Thank you.

MADDOW:  Before we get to the budget, I want to get your reaction to today‘s big, scary economic news.  The Dow has not closed this low in about 12 years.  How worried should we be that the economic downturn is still turning down—that we haven‘t hit bottom yet?

FRANK:  Well, we should be very worried and we should be supportive of the kind of intervention that‘s necessary to fix it.  I mean, here is President Obama, one month into a presidency, coping with the terrible problems he inherited from the Bush administration and it wasn‘t just the Bush presidency, with six out of the eight years of Republican Congress.

Look, here‘s the problem we have.  And you know, you were right about

how horrified we have to be about AIG.  But there‘s this fact of sort of political physics, a solution cannot be more elegant than the problem it‘s trying to solve.  The worst, the messier, the dirtier the problem, the less clean the solution is going to be.

I do believe that if President Obama keeps on the path that he‘s going on, we will come out of this.  It‘s going to take a couple of things.  First of all, responding currently.  Secondly, putting rules in place—and this is probably the most important thing to do.  And there‘ll be a big party fight over this.

We have to put all in place because you are correct, it was a total absence of regulation that allowed this to happen.  We were told, if you leave capital alone, if you don‘t tax it, you don‘t regulate it, you don‘t disturb it, it will take care of all of us.  What it did was unregulated capitalism promoted disaster.

So, one of the things that you are going to see, I hope before the summer, certainly before the end of the year, is a new set of rules and those comparisons Republicans like to make to the New Deal will once again be appropriate.  Because just as Franklin Roosevelt regulated the stock market and put an end to the wild abuses that contributed to the depression, we‘re going to put some strict regulations on those financial manipulations that caused this crisis.

MADDOW:  The current fight right now, of course, will be the budget.  The president having introduced his budget on Thursday; the Republicans are complaining about the size of the budget and the size of the deficit.  Some are even proposing a spending freeze.

The budget doesn‘t need 60 votes in the Senate to pass.  I wonder if there will be an effort to try to get Republican votes onboard with this budget or do you think that Democrats will just ignore them this time?

FRANK:  Well, they will try.  The budget tends to be very partisan.  And I think, look, bipartisanship is a means, it‘s not the end.  And I think the president may have confused those two.  If we can get Republican support, fine.  I‘m chairman of a committee.  I try to get as many votes for something as I can.  But you don‘t trade substance where there are differences, different issues of principle for two or three extra votes.

And—so, if some Republicans want to do this, I think that‘s a useful thing.  On the other hand, you‘ve seen this, I mean, astounding reaction.  What we‘ve seen—there‘s a number of Republican governors and, Rachel, this is just the most extraordinary and discouraging thing—we got people who are out of work and we all acknowledge, when you get unemployment this high, there will be people out of work and it‘s in no way their fault.  This is just a bad economy.  So, what we‘re doing is providing federal funding to help provide unemployment compensation for people who‘ve been thrown out of work.

And you have these brave Republican governors, Governor Jindal and Governor Barbour, Governor Sanford of South Carolina; apparently, they are going to show how tough they are by denying adequate compensation to the children of people who are out of work.  It‘s a strange kind of toughness.  Their ability to bear the hardships of others may be impressive to them, but when you‘re dealing with people like that, you can‘t allow that kind of, I think, distorted view of the world to stop you.

So, if the Republicans, some Republicans vote with it—that will be fine.  But that budget is a very good budget.  It is thoughtful.  It deals with important public needs.  It responds to the economic needs of the country.

And if the Republicans aren‘t going to vote for it, if they‘d rather brag about how they deny adequate funding to the kids of somebody who‘s been out of work, let them do it.

MADDOW:  Now, you have proposed cutting the military budget substantially as a means of lowering the deficit for the long term.  Why the military budget and why now?

FRANK:  Well, first of all, if we get out of Iraq, that will save us a lot of money.  But military spending, let me quote Alan Greenspan, obviously, a man with great conservative credentials, who says, military spending is among the least productive spending you can have.

And it‘s very ironic.  The conservatives are yelling about two things.  First of all, the deficit is terrible, the budget is too large.  Secondly, we‘re not spending enough on the military.  You spend on the military for what you need.  Extra spending on the military on things you don‘t need is a grave error.

By the way, Rachel, you‘ve got a good hypocrisy detector.  Turn it on when some of my right-wing colleagues start talking about how we have to keep spending on the military because it‘s good for jobs.

All these arguments you‘ve heard about how the government can‘t stimulate the economy, how government spending doesn‘t produce jobs, apparently, that doesn‘t apply to weapons spending.  If the government helps build a bridge, if the government provides funds for people who are unemployed that they can then go out and buy things that they need, that apparently doesn‘t help the economy.  But if we build bombers that have as their purpose defeating the Soviet Union in the Cold War, and huge amounts of money is still going for Cold War weapons, somehow, that does affect the economy.  That‘s kind of a weaponized version of Keynes that they are partial to.

MADDOW:  Congressman Frank, we‘re just about out of time, I just have to ask quickly, do you expect your Democratic colleagues in the House to be supporting you on this?  Do you expect political support or do you think this is a sort of thing that takes a few years to build up support for?

FRANK:  It‘s going to take a few years, Rachel, because the key is this—we are at a zero sum situation.  We do need to worry about the deficit.  If we do things like build a bomber to defeat the Soviet Union in the war that‘s over, one of my favorites is we are going to spend billions of dollars to defend the Czech Republic against Iran.  We have a missile system we are asked to spend billions and billions for and it‘s to put missile defense in Poland and the Czech Republic because, apparently, there was a fatwa to the nth (ph) degree in which the Iranians have threatened Prague.

It‘s a waste of money.  And it‘s not only a waste of money, but it‘s money that will be not available when we want to build bridges or hire police officers or fund schools or provide health care.

MADDOW:  Congressman Barney Frank, chair of the House Financial Services Committee—thank you for joining us tonight, sir.  I really appreciate it.

FRANK:  (INAUDIBLE)

MADDOW:  Republican elected officials—here are your current political options, thanks to your own party and the conservative movement.  You can be either for Rush Limbaugh‘s position, hoping that President Obama and by extension, the federal government fails.  There‘s a message to warm the hearts of anxious independent voters.  Or you can say that you hope that this presidency succeeds and then you will face the guillotine from your own party.  Take your time.

“GOP in Exile” is coming up.

But first, One More Thing about the economy.  Back in December, you may recall us reporting on the Republic Windows & Doors factory in Chicago.  The company abruptly closed down and its 250 employees staged a sit-in to protest losing their jobs and to fight for benefits they were due in that shutdown.  Our first follow-up to that story was that the employees succeeded in getting those health and severance benefits that they were owed.

Our second follow-up was that their factory might get bought and reopened by a green technology firm in California called Serious Materials.  The latest follow-up, sales gone through, the factory is likely to reopen, and those workers who fought back are expected to be hired back by this new firm, union jobs in their old factory.

Vice President Biden says the stimulus bill spending for making building more energy-efficient is expected to drive up demand for the kinds of windows made by Serious Materials, which has caused the company to ramp up its production which has got those workers back their jobs.  That‘s how it works.  Economic stimulus.  Tada!

(COMMERCIAL BREAK)

MADDOW:  Some scrubbing and rinsing going on at FEMA‘s office in New Orleans.  The acting head of the Federal Emergency Management Agency, Nancy Ward, is reassigning the chief-of-staff in the New Orleans FEMA office after a congressional hearing revealed allegations of sexual harassment, cronyism, nepotism and claims that the office manager‘s, they slowed gulf coast recovery efforts on purpose in order to keep their jobs longer.

Senator Mary Landrieu says the chief-of-staff in that office was the target of more than 30 complaints by his co-workers.  I don‘t know why we still have an acting FEMA director instead of full-fledged one, but so far, in terms of accountability at least, I sort of like the way this acting director is acting.

(COMMERCIAL BREAK)

MADDOW:  In 2007, the “New York Times” reported that the CIA had destroyed at least two videotapes showing, quote, “severe interrogations.”  The interrogations happened in 2002.  The tapes were destroyed in 2005. 

“The Times” reported on that back in 2007.

And now, bombshell.  News that it wasn‘t just two tapes that were destroyed, it was 92 tapes, which means it wasn‘t—oops, how did that slip into the shredder, it was a systematic effort apparently to destroy that kind of evidence.  For the past year, sort of under the radar, a special counsel, U.S. Attorney John Durham has been investigating whether the CIA broke laws by destroying those interrogation tapes.  On Friday, the CIA is expected to give a list of witnesses who viewed those tapes before they were destroyed.  They could presumably testify as to what was on them, if they were ever asked to do so.

Also today, late this afternoon, the Obama Justice Department released nine previously secret post-9/11 legal memos in which the Bush administration claimed they believe the Fourth Amendment, that, you know, handy little amendment that protects us from unreasonable search and seizure, they believed the Fourth Amendment no longer applied in the United States.  They believe that the military could search and seize anything and anyone in this country as long as they said their targets were terrorism suspects and as long as the president said “Ollie, Ollie, oxen free,” essentially.

Another memo by Justice Department lawyer, John Yoo, also said the First Amendment was no constitutional match for the president anymore, he could override it as he saw fit.  Quote, “First Amendment speech and press rights may also be subordinated to the overriding need to wage war successfully,” unquote.

Joining us now is “Newsweek‘s” investigative correspondent, MSNBC contributor, Michael Isikoff.

Michael, thanks for joining us tonight.

MICHAEL ISIKOFF, NEWSWEEK:  Good to be with you, Rachel.

MADDOW:  These nine memos first.  What legal prerogatives were the Bush administration claiming after 9/11 that we didn‘t know about before these memos came out today?

ISIKOFF:  I think it was that “Ollie, Ollie, oxen free” proviso that you referred to.  No.  Look—we have known for quite some time that the Justice Department during this period was giving the green light for a whole wide range of activities, warrantless surveillance, interrogations, harsh interrogations of suspects, citing broad, expansive powers that they claim the president had in light of the 9/11 attacks.

But every time we get one of these memos, we discover new claims and new assertions that were being made.  Like the one you just cited in this October 23rd, 2001, memo, written by John Yoo, who was the intellectual author of the legal philosophy that the Bush administration was relying on, saying that if the Fourth Amendment didn‘t apply in—during the war on terror—there is no reason the First Amendment guarantees the freedom of press and freedom of speech should apply either.

We are at war.  The president in wartime has unlimited, unfettered executive power to defend the country, and the Justice Department was essentially giving the green light to that.

MADDOW:  Michael, I know the Bush administration repealed these memos as one of their very last acts—one of the Bush administration‘s last acts.  They said they have not relied on the advice in these memos for quite some time.  Why then repeal them right before Bush leaves office?

ISIKOFF:  Actually, that was one of the most interesting revelations today that with five days left in George Bush‘s presidency, Steve Bradbury, who was the chief of the Office of Legal Counsel, suddenly reviews these memos and says they are—they shouldn‘t be relied on, that the legal reasoning on this was poor and not authoritative.

You know, we know a couple of things going on.  Obviously, the Obama Justice Department was going to get into the files and be able to review these memos and release them, and a lot of people would get egg on their face.  We also know, as we talked about a couple of few weeks ago on this show, that there is this ethics review and report, the Office of Professional Responsibility inside the Justice Department into the authors of these memos.

Steve Bradbury was one of the people who was being investigated as part of that review.  And Bradbury may have been trying to cover himself a little bit, trying to show—hey, I didn‘t sign off on these really wild-eyed John Yoo memos.  I was—I actually rescinded them.  The problem he‘s got is the timing and, you know, why he waited so long to pull these memos back.

MADDOW:  The CIA on those interrogation tapes, Michael, they said two years ago that the two interrogation tapes we knew about then, they said they were destroyed to protect CIA interrogators and their families from retaliation by al Qaeda and their sympathizers, even though, presumably, they .

ISIKOFF:  Yes.

MADDOW:  . could fuzz out any identifying information about CIA officers on these tapes.  Do we have any explanation thus far about why the other 90 tapes were destroyed?

(LAUGHTER)

ISIKOFF:  Well, what the CIA is saying is—these 92 tapes were tapes of two suspects.  They never said there were two tapes.  They said that there were tapes of interrogations of two suspects.  And so, when I put to them today, “92 interrogations of two suspects,” they‘re saying, “Well, they are not all interrogations.  Some of these were just of the suspects themselves.”

The problem with that—in other words, it was not the waterboarding of the suspects and not the CIA interrogations, just of the suspects themselves sitting around in their black site secret cell somewhere—the problem with that is it‘s hard to square with the CIA‘s original explanation that they had to protect the identities of the CIA interrogators.  If it‘s just the suspects, then, whose identity are you protecting by destroying the tapes?  There‘s still clearly a lot of explaining to do here.

MADDOW:  Yes, fascinating stuff.  And we are lucky to have you helping us work through it.

Michael Isikoff, MSNBC contributor and “Newsweek‘s” investigative correspondent—thanks, Michael.

ISIKOFF:  Thank you, Rachel.

MADDOW:  Coming up next: Nutella.  Not the delicious hazelnutty chocolate goo, but rather the file-sharing software which has reportedly enabled a security breach involving the president, his helicopter, Marine One, blueprints of that helicopter and Iran.  Also, hazelnutty chocolate goo—coming up.

(COMMERCIAL BREAK)

MADDOW:  In just a moment, comedian Hal Sparks, media magnet Arianna Huffington and me, all at this very tiny desk in Los Angeles, all talking about what in goodness‘ sake is going on with the Republican Party in hoping that this new presidency fails.  That is all coming up.

But first, it‘s time for a couple of holy mackerel stories in today‘s news.  Our first story is about an endangered political species—the New Hampshire Republican.  Personally, my partner‘s family lives in New Hampshire, so I spend quite a bit of time there.  I can tell you, it is my impression that New Hampshire is not the most liberal place in the country, but it is now, apparently, a rather deep and saturated shade of blue.

New Hampshire‘s governor is a Democrat.  The state Senate is controlled by the Democrats.  The Statehouse is controlled by the Democrats.  Both members of Congress from New Hampshire are Democrats.

And in terms of their U.S. senators, well, Judd Gregg is a Republican but his story offers no real comfort to the New Hampshire GOP.  Gregg, inexplicably and unexpectedly and inarticulately withdrew as President Obama‘s commerce secretary nominee after initially saying that he would do it.  Mr. Gregg now finds himself embroiled in conflict of interest allegation about he and his brother having real estate deals that hinged on Senator Gregg steering federal money to redevelop a former New Hampshire Air Force base.

The other New Hampshire Senate seat is now held by Democrat Jeanne Shaheen.  She ousted the Republican incumbent John Sununu back in November.  Now, John Sununu is turning out to be an embarrassment to New Hampshire Republicans even as a defunct elected official.  Republican senator and minority leader, Mitch McConnell, tapped former Senator Sununu to be on the oversight panel for TARP, the banking bailout, as sort of a consolation prize after he lost his bid for re-election.

The TARP oversight board is the panel that‘s headed up by Elizabeth Warren.  You remember her as a guest on this program every single time we can convince her to do it.  That oversight board is in charge of making sure that the bailout is being administered right and that the banks are doing what they are supposed to be doing with the money.

Since joining Elizabeth Warren‘s TARP oversight board, New Hampshire Republican Senator John Sununu made the genius decision to join the board of a bank that‘s not only receiving TARP bailout money itself but it‘s also the bank that got the contract to administer the whole program.  He joined the board of a subsidiary of Bank of New York Mellon; they‘re the ones doing all the accounting for the bailout.  Sununu is on an oversight board in charge of overseeing whether that accounting is done right, and now, he has joined that accountant‘s board.  What?

Good on “Talking Points Memo” for catching the announcement about Sununu‘s new gig.  Hats off, ironically, to Bank of New York Mellon for having the audacity to put one of their overseers on their own board.  And John Sununu and New Hampshire Republicans—what‘s going on with you guys?

Finally, on a day of atrocious economic news at the start of the week in which we are all going to be walking on egg shells, worrying about the unemployment numbers coming out of Friday, there is a teeny, teeny, teeny, tiny, tiny little silver lining on one very specific type of employment news.  Millions of Americans may soon be newly-eligible to enlist in the armed forces, and thousands currently enlisted may no longer face the risk of unceremonious dismissal.

California Representative Ellen Tauscher has introduced legislation that would end the military‘s disastrous “don‘t ask, don‘t tell” policy, which over the course of the last 15 years has resulted in more than 12,000 people being kicked out of the U.S. military for the crime of having the gay. 

The Service Members‘ Legal Defense Networks says an average of two people get kicked out of the military under “don‘t ask, don‘t tell” every single day.  Their research indicates that 3,000 men and women every year decide not to enlist or re-enlist because of this law. 

The bill that would repeal “don‘t-ask, don‘t tell” is called the Military Enhancement Readiness Act.  It died in Congress last year even though it had 149 bipartisan co-sponsors. 

This year, maybe it‘s got a better chance.  Colin Powell is for

re-evaluating the law.  Former chairman of the joint chiefs John

Shalikashvili says he‘s for repealing it.  Even little Sam Nunn, the conservative Democrat who lead the demagoguing of the issue during the Clinton years - he has had a change of heart on “don‘t-ask, don‘t tell.” 

Oh, and not incidentally, the new president is against it and 75 percent of Americans say that gay people should be allowed to serve openly.  And - and, well, the arc of the universe bends toward justice.  There‘s that, too. 

(COMMERCIAL BREAK)

MADDOW:  In our continuing chronicle of the Republican Party‘s search for meaning in the political minority, they appeared to have started to settle on maybe not a reason to exist but a theme around which to organize the fact that they do still exist. 

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, CONSERVATIVE RADIO TALK SHOW HOST:  What is so strange about being honest and saying I want Barack Obama to fail if his mission is to restructure and reform this country so that capitalism and individual liberty are not its foundation?  This notion that I want the president to fail - folks, this shows you a sign of the problem we‘ve got. 

(END VIDEO CLIP)

MADDOW:  The notion that anyone in America wants a presidency to fail when after all the president, you know, leads the Federal Government.  And so what we are talking about is rooting for the Federal Government to fail.  You know, that does have a clarifying effect on our politics. 

(BEGIN VIDEO CLIP)

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY:  I asked individual Republicans whether they agree with what Rush Limbaugh said this weekend.  Do they want to see the president‘s economic agenda fail? 

(END VIDEO CLIP)

MADDOW:  That is the trouble for Republicans in exile.  Disagree with Rush Limbaugh you hope the president fails and you risk alienating your base to people who give standing ovations to Mr. Limbaugh.  Agree you hope the president fails and you risk alienating everybody else, anyone who‘s mortified by Americans rooting for the failure of their own government and their own country. 

So how have individual Republicans threaded this needle? 

“ThinkProgress.org” asked former Pennsylvania Senator Rick Santorum. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  What do you think about Rush said?  I mean, do you hope - should we hope that President Obama fails. 

FMR. SEN. RICK SANTORUM (R-PA):  Yes. 

UNIDENTIFIED MALE:  Yes? 

SANTORUM:  Absolutely.  We hope his policies fail ...

UNIDENTIFIED MALE:  OK. 

SANTORUM:  ... because, well, I believe his policies will fail.  I hope they fail.  I don‘t know.  I believe they will fail. 

(END VIDEO CLIP)

MADDOW:  OK.  So check for Sen. Santorum.  How about former House majority leader Tom DeLay. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  Do you agree with Rush Limbaugh that we shouldn‘t hope for President Obama to succeed? 

TOM DELAY ®, FORMER HOUSE MAJORITY LEADER:  Exactly right. 

UNIDENTIFIED MALE:  OK.

DELAY:  I don‘t want this for our nation.  That‘s for sure. 

(END VIDEO CLIP)

MADDOW:  OK.  Check to you, too, Tom.  Now, RNC Chairman Michael Steele. 

(BEGIN VIDEO CLIP)

MICHAEL STEELE, CHAIRMAN, REPUBLICAN NATIONAL COMMITTEE:  Let‘s put it into context here - Rush Limbaugh is an entertainer.  Rush Limbaugh - his whole thing is entertainment. 

(CROSS TALK)

Yes, it is incendiary.  Yes, it is ugly. 

(END VIDEO CLIP)

MADDOW:  Incendiary and ugly.  Now, that sounded like Mr. Steele is anti-rooting for failure except “Politico.com” reports now that Mr. Steele has backed right down from that, saying, :That wasn‘t what I was thinking.  I have enormous respect for Rush Limbaugh.  I wasn‘t trying to slam him.  It wasn‘t at all I intended to say.  I can‘t believe it came out like that.”  Nice.

So what happens when your party settles on rooting for the failure of the Federal Government as the basis of its claim that it ought to be back to be back in power running that government?

Joining us now, Arianna Huffington, co-founder and editor of “Huffington Post,” and comedians Hal Sparks, lead singer of the band Zero1.  It‘s so nice to have you both here. 

HAL SPARKS, COMEDIAN:  And nice to be here.

ARIANNA HUFFINGTON, CO-FOUNDER, “HUFFINGTON POST”:  Great to be here. 

And you know, I‘m so sorry that his hair is longer than mine. 

SPARKS:  We tried to work it out before ...

HUFFINGTON:  I tried to get a pair of scissors and -

SPARKS:  ... but we didn‘t have time to trim it even.

MADDOW:  In the break, we will switch hair. 

SPARKS:  Yes.

MADDOW:  Arianna, you are a former Republican.  Are these guys in a hard spot now?  I mean, is there any right answer to the question, “Do you agree with Rush Limbaugh?” 

HUFFINGTON:  Oh, absolutely.  There is a right answer if they want to become a governing party again, if they don‘t want to spend the rest of eternity in exile.  And that right answer is yes, I don‘t agree with Barack Obama‘s policies, but of course, I want him to succeed because it is about millions of Americans suffering otherwise.” 

So that is not an answer that in any way does not make a good Republican.  But unfortunately, as you demonstrated with Michael Steele‘s apology effectively, they don‘t dare alienate Rush Limbaugh. 

But Karl Rove - it is very interesting, Rachel, watching him on “Stephanopoulos” on Sunday - he also dismissed Limbaugh.  He called him sort of red meat for the base.  And I‘m much more worried about what Karl Rove is saying because he is doing the subtle revisionist history, making us kind of forget why we are in this mess. 

And that is more dangerous than what Rush Limbaugh is doing, which is a shiny object over here that we can all talk about.  But it is so easy to marginalize him compared to this revisionism what Karl Rove is engaged in. 

MADDOW:  But Hal, when you look at this and you‘re trying to decide what the balance is here between funny and scary ...

SPARKS:  Right.

MADDOW::  ... is the fact that the Republicans are so far out of power make it more funny than scary? 

SPARKS:  Yes, absolutely.  It saves you from the tarrying aspect, because their hand isn‘t actually on the switch, you know.  And there is an element of humor to a group of people who I think - I don‘t know what the actual ratio is, but I think 50 percent of the people you‘re getting quotes from have been indicted or charged with drug possession or something along those lines.  So it‘s a little funny.

What they are really attacking is what they believe is the messianic leader of some sort of liberal movement.  They want Obama to fail in a Christ-like way.  And they think that can happen without it ruining the country in their own little mind, like, “Oh, he‘ll fail and then, we‘ll just kind of push him out of the way and do what we wanted to do because what we were doing was working so well.” 

MADDOW:  Yes.  But we end up in a situation, though, because they are so far out of power ...

SPARKS:  Right.

MADDOW:  That the people who speak at CPAC and who get quoted on this.  I mean it‘s - Rick Santorum - no longer a senator.  Tom DeLay - no longer a member of the House, also not yet in prison.  Michael Steele - former lieutenant governor of Maryland, failed Senate candidate who is the head of the Republican Party.  These are not people who are in power. 

Does that allow them to be self-destructively radical because they don‘t have the responsibility of governing? 

SPARKS:  Absolutely.  There is a freedom to not actually having anything - you don‘t have to show anything for it. 

MADDOW:  Yes.

SPARKS:   You can say anything you want because you don‘t actually have to draft policy.  If you look at Eric Cantor‘s statements, they‘re constantly muted and softened.  And he will spike with little things.  But pretty much he has to keep even because he‘s got work to do.  The rest of them can just go, you know, “Rally the troops.  Call for, you know, armed rebellion,” and silly stuff like that. 

HUFFINGTON:  Let‘s not forget, you know, how disconnected the CPAC audience is from the rest of the country. 

SPARKS:  And reality. 

HUFFINGTON:  Among them, reality.  Among them, only four percent approve to Barack Obama compared to 80 percent of the rest of the country. 

SPARKS:  You also have to look at the three big talkers at this one.  Rush Limbaugh - huge, of course.  Michael Steele and with his Michele Bachmann kind of tag-team match which was really embarrassing, and sad. 

MADDOW:  “You be the man.” 

SPARKS:  Yes.  Exactly, “You be the man.”  And then this 13-year-old conservative who is basically doing the Republican version of, “I‘m a PC and I‘m four years old” ad, which is really what they‘re shooting for.  They‘re really yanking that from Microsoft because that‘s doing well for them as well.  But these are their three top - you know, and Joe the Plumber sitting in an empty bookstore and everyone being amazed. 

HUFFINGTON:  The only thing for us to remember is that it is very easy to have Rush Limbaugh as the sort of the face of the Republican Party.  It is really almost too easy to attack him. 

MADDOW:  Good for him.  It‘s great for Democrats. 

HUFFINGTON:  Yes.  He also looks a little bit like the pimp, you know,

in the Nevada brothel, you know, in his black shirt, you know -

SPARKS:  Dennis Hoff -

HUFFINGTON:  Dennis Hoff, you know, his black jacket. 

SPARKS:  Yes, from his Bunny Ranch -

MADDOW:  I don‘t look at rush Limbaugh and think pimp, ever.  No, no, no, no. 

SPARKS:  Never?

HUFFINGTON:  You may have to apologize. 

SPARKS:  I see him as client.  But that‘s another story. 

HUFFINGTON:  No, no, no, no.

MADDOW:  No, no, no, no.  Yes, I‘m sorry.

HUFFINGTON:  I want to go back to Karl Rove. 

SPARKS:  Yes.

HUFFINGTON:  Because, for me, the question is why are the media having Karl Rove on to give advice on fixing the economy? 

SPARK:  Right.

HUFFINGTON:  Isn‘t it the equivalent to having Bernie Madoff on to give advice on the investment? 

SPARKS:  On investment.  Ye, absolutely.

HUFFINGTON:  Because, you know, he was one of the architects of the getting us where we are.  We need to keep reminding people of that.  Because you know, George Orwell once said that he who controls the past controls the future. 

MADDOW:  Yes.

HUFFINGTON:  In other words, people say things like you had at the beginning of the show.  You know, “Why are we spending so much money in the middle of a recession?”  And so you need to remind people of history and of facts. 

Otherwise, when things don‘t work out quite as we want them to and we haven‘t hit bottom yet, people are going to run out of patience.

SPARKS:  Right.

HUFFINGTON:  And people like Karl Rove and Newt Gingrich have ready-made narratives ...

SPARKS:  They‘ll use that to attack -

MADDOW:  Yes.

HUFFINGTON:  ... as to why things haven‘t worked out. 

MADDOW:  Well, I believe that the country is better served by having a robust opposition than by having just a one-party state.  I mean, I want both parties to be healthy as long as we‘re going to have a two-party system.  But then I look at the results of the straw poll from CPAC, right? 

And Mitt Romney wins, then Bobby Jindal - 

SPARKS:  He‘s the anchorman of choice. 

MADDOW:  Yes.  Then Bobby Jindal, then Sarah Palin, then Ron Paul.  There will be a failed presidential nominee, a Republican governor who was compared to Kenneth the Page, for his rebuttal to Obama last week. 

SPARKS:  Right.

MADDOW:  A failed vice presidential nominee and a man who will be aged 77 in 2012.

(CROSS TALK)

HUFFINGTON:  Here‘s the thing.  Here‘s the thing.

SPARKS:  Yes.

HUFFINGTON:  We should not be wasting an ounce of your precious time on this show discussing that poll.  Because in 2006 and 2007, do you know who they picked? 

MADDOW:  Who? 

HUFFINGTON:  George Allen. 

MADDOW:  All right. 

HUFFINGTON:  Do you remember George Allen? 

MADDOW:  President Allen.

SPARKS:  But also remember, this is not really a popularity - who you think should be mooting.  It is almost like, “OK.  Who is the most handsome guy we‘ve got?  Who is the cutest guy we‘ve got?  Who‘s the fringe people?”  You know, they really picked these almost like high school wards.  They didn‘t seem to, like, “Who is the substantive voice.  We need to clean this up and move forward.” 

MADDOW:  It‘s also a straw poll which is methodologically roughly equivalent ... 

SPARKS:  Right.  Exactly, yes.

MADDOW:  to like me asking you guys what we think.  Well, comedian Hal Sparks, Arianna Huffington of “Huffington Post.”  It is a pleasure to have you both here.  I‘ve never had two people on set with me at the same and I was quite sure you two wouldn‘t fight.  So thank you. 

HUFFINGTON:  No.  Not at all. 

SPARKS:  Yes.  We‘ll fight later.  Off camera.  Just for fun. 

MADDOW:  Thanks, you guys.  All right.  Coming up next, the not-so story about the president‘s helicopter, Marine One, a security breach involving blueprints, the file sharing program Nutella and maybe Iran.  A reporter who was working on this insane story will be with us, next.    

(COMMERCIAL BREAK)

MADDOW:  Guns for hire.  Blackwater lost their big State Department contract in Iraq in part of because of that whole pesky shooting-civilians thing.  Time for a corporate makeover, right?  Well, first, they changed their name to X-E, they want you to pronounce “Z” but I desperately want to pronounce “she.”  X-E?  Come on!

Now, today, in order to fall further down the public‘s memory hole, Eric Prince, CEO and founder of the company has announced he is stepping down.  Sort of.  He will stay on as chairman but not CEO.  Was it because Eric Prince was too Blackwater-like and not enough she-like? 

(COMMERCIAL BREAK)

MADDOW:  President Obama is having some issues with his helicopter.  First, the proposed new fleet of 28 Marine One helicopters is massively over budget.  Each one proposed at now costing more than Air Force One. 

That caused John McCain to publicly holler at the president at the White House Fiscal Responsibility Summit whereupon President Obama took the wind right out of his sails by saying he had already asked the Defense Secretary Bob Gates to review the Marine One program. 

Now, it appears the helicopters are at the center of a security breach.  NBC‘s Pittsburgh affiliate WPXI reports that detailed files about the new high-tech Marine One were discovered at an IP address abroad, in Iran. 

A Pennsylvania-based company which monitors peer-to-peer file sharing networks found these sensitive files and then traced them back to the source, reportedly a computer at a defense contractor in Maryland. 

But how did these sensitive files get from that defense contractor to Iran and who knows where else? 

Joining us now is Rick Earle who is an investigative reporter with WPXI in Pittsburgh.  He broke this Marine One story on air.  Mr.  Earle, thank you very much for coming on the show. 

RICK EARLE, INVESTIGATIVE REPORTER, WPXI:  Rachel, you‘re quite welcome.  Pleasure to be here. 

MADDOW:  How did these blueprints from Marine One - this other sensitive information about the president‘s helicopter - end up on a computer abroad? 

EARLE:  Well, that‘s the big question everybody here wants to know.  And it appears that this company that‘s based just outside of Pittsburgh here, a company by the name, Tiversa, they monitor these file-sharing networks, these file-sharing programs and were able to track these blueprints from Marine One. 

They found them out there on the Worldwide Web.  They apparently had been downloaded on a computer that was using this fire-sharing network.  You know, those are file-sharing networks like Lime Wire, Bear Share - those networks that people use routinely to exchange music or videos. 

Apparently, someone with this defense contracting company was using that program on their computer and those sensitive Marine One documents were somehow downloaded out on to the Worldwide Web through this file-sharing network.  And they wound up traced to this computer in Iran and that‘s why this company, Tiversa, found those documents just last week.  So it‘s just incredible story here. 

MADDOW:  Do we know that this is something that foreign governments, foreign intelligence agencies do, that they troll the Internet looking for computers that might have peer-to-peer sharing software on them and therefore might offer access to the files on their hard drives? 

EARLE:  You know., that‘s a very good question and that‘s one we asked retired Gen. Wesley Clark.  He‘s also a board member with this company, Tiversa.  And he says, yes, that‘s what they do. 

He says they are out there perusing these file-sharing programs, looking for sensitive documents such as this, about Marine One.  You can find a host of other things out there as well.  I mean, we‘re talking everything from tax returns to any confidential information that you may have on your computer. 

If you have one of these file sharing programs on there, it opens everything up on your hard drive to the Worldwide Web and people have access to that.  So anything can be compromised. 

MADDOW:  It‘s one thing to imagine your own personal information - your own personal financial information, even a company‘s financial information.  But this is the blueprints, all the avionics information for Marine One. 

What did this Internet security company do after they discovered these Marine One files?  And has the White House had any reaction to this? 

EARLE:  Well, this Internet security company immediately contacted the Federal Government and alerted them about what they perceive to be a real big breach of security here.  They said they are working with the Federal Government to get to the bottom of all of this right now.  They said they‘ve also been in contact with the Secret Service working on this. 

Now, we called the White House over the weekend when the story broke.  We couldn‘t get a response from them over the weekend but we did talk to them today.  And they referred us to the Department of the Navy.  Department of the Navy meanwhile says they are aware of this and they are looking into this. 

But again, it‘s a very serious issue here and General Clark told us the other day that this is something that the government really needs to look at and really needs to clamp down on, whether you monitor this in real-time, have someone actually sitting there, monitoring these file sharing programs so you can see what‘s going out, so you can put a stop to it or whether you go to the extent of encrypting some of these documents. 

So there are some ways you can actually prevent this.  But he says the government has to be more diligent when it comes to monitoring this stuff.

MADDOW:  Rick Earle, investigative reporter with WPXI in Pittsburgh, congratulations on the scoop.  Incredible and scary story.  Thanks.  Have a good night.

EARLE:  You, too.  Thank you. 

MADDOW:  Coming up on “COUNTDOWN,” Keith Olbermann examines the GOP circular firing squad initiated by Rush Limbaugh. 

Next on this show, I get just enough pop culture from my friend, Kent Jones.  Guess who got a book deal?  It rhymes with Flaflojevich(ph). 

(COMMERCIAL BREAK)

MADDOW:  Now, it is time for “Just Enough” with my friend Kent Jones. 

Hi, Kent.  Nice to see you.  What have you got? 

KENT JONES, POP CULTURIST:  Hi, Rachel in L.A. where it‘s warm.  The economy isn‘t tanking for everyone.  Guess who signed a six-figure book deal today?  Blago - can‘t wait for the audiobook. 

The working title is “The Governor” and will be released in October.  Blagojevich will reportedly write about picking Obama‘s successor to the Senate.  Because if there‘s one thing we haven‘t really heard, it‘s his point of view on all of this.  Do you think he could be talked into doing a book tour?  Oh, please. 

MADDOW:  I love also the idea that he‘s calling it “The Governor” because the other meaning of the word “governor” is something that slows something down. 

JONES:  Yes.

MADDOW:  Yes.  You think you‘re slowing things down, Gov.? 

JONES:  Oh, yes.  So much.  Next up, U2 played a surprise rooftop concert in downtown London to promote their new album, “No Line on the Horizon” which comes out tomorrow.  About 5,000 fans gathered to watch Bono, Edge, Adam and Larry play for about 20 minutes.  Keep it up, young fellows, success is just around the corner.  Someday, you‘ll get to play indoors.  I‘m convinced. 

MADDOW:  Also, just - I mean, I sort of love the stamina, I guess, the fact they are still totally going for it after all of this. 

JONES:  Yes.  They think they haven‘t made it.  It‘s hilarious.  We‘ll play on the roof. 

Finally, a new survey found states that consume the most online porn tend to be fairly conservative and religious.  Eight of the top 10 porn consuming-states gave their electoral votes to John McCain last year.  Put it this way, Utah came in first. 

MADDOW:  What? 

JONES:  Yes.  Said the author of the study, quote, “Some of the people who are most outraged turned out to be consumers of the very thing they claim to be outraged by.”  Now, dangled participle notwithstanding, he makes an excellent point. 

MADDOW:  Also -

JONES:  You could marry -

MADDOW:  Yes.  A, good for catching grammar.  B, how do you explain to people, your colleagues, that that‘s what you study?  I‘m checking to see how much porn Utah looks at. 

JONES:  Yes.  Well, there‘s that, too.  It‘s all research.  It‘s all research.

MADDOW:  Yes, exactly. 

JONES:  It will be reviewed.

MADDOW:  All right.  Kent, I have a cocktail moment for you from here in L.A.  You know how we talked about Earth, Wind and Fire playing in the White House? 

JONES:  Oh, yes.  I‘m very jealous.

JONES:  It was - Earth Wind and Fire - they were there, not this past weekend but the weekend before.  And Earth, Wind and Fire playing at the White House was on the occasion of the governors‘ dinner. 

Now, here‘s the amazing thing.  That was the first black tie event that has been held at the White House since Obama was president.  Dinner for the governors, Earth, Wind and Fire - they had dinner at the state dining room. 

Afterwards, they escorted the governors down to the East Room.  Barack Obama went to bed ultimately and after he went to bed.  And the Associated Press today, they formed a conga line - the governors. 

JONES:  No.  They‘re conga-ing in the White House.

MADDOW:  I know.  Thank you for watching tonight.  We‘ll see you from L.A. again tomorrow night.  “COUNTDOWN” with Keith Olbermann starts right now. 

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

END   

Copy:     Content and programming copyright 2009 MSNBC.  ALL RIGHTS RESERVED. 

                Transcription Copyright 2009 CQ Transcriptions, LLC ALL RIGHTS  RESERVED.

                No license is granted to the user of this material other than for research.

                User may not reproduce or redistribute the material except for user‘s

                personal or internal use and, in such case, only one copy may be printed,

                nor shall user use any material for commercial purposes or in any fashion

                that may infringe upon MSNBC and CQ Transcriptions, LLC‘s copyright or

                other proprietary rights or interests in the material. This is not a legal

                transcript for purposes of litigation.

WATCH 'THE RACHEL MADDOW SHOW' WEEKDAYS AT 9:00 P.M. ON MSNBC.

Discuss:

Discussion comments

,