updated 3/13/2009 10:11:04 AM ET 2009-03-13T14:11:04

Guest: Allyson Parsons, William Cohan, Roger Altman, Chris Kofinis, Michelle Bernard, Chris Cillizza, John Yang

(BEGIN VIDEOTAPE)

DAVID SHUSTER, HOST (voice-over):  Tonight, President Obama delivers a warning to the states.

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES:  If we see money being misspent, we‘re going to put a stop to it, and we will call it out and we will publicize it.

SHUSTER:  But on Capitol Hill, the public debate intensifies over the administration‘s budget.

UNIDENTIFIED MALE:  When I look at this budget, I see the debt doubling again.  And that gives me great concern. 

SHUSTER:  Plus, “Follow the Money”—the bailed out banks and their misleading accounting rules. 

UNIDENTIFIED MALE:  Toxic assets became bad assets, and now they‘re legacy assets.  Did any of you come up with that term?  Because if you did...

SHUSTER:  Later, South Carolina‘s governor declares...

GOV. MARK SANFORD ®, SOUTH CAROLINA:  We don‘t think it‘s a good idea to spend money if you don‘t have it. 

SHUSTER:  Governor Sanford lands in “Hypocrisy Watch.”

And the things I thought you should know: In Iraq, the shoe-thrower gets a three-year prison sentence; in Colorado, farmers are complaining about UFOs. 

UNIDENTIFIED FEMALE:  We have other life out there, and I think that‘s what it is. 

SHUSTER:  And Twitter time. 

All tonight on 1600 PENNSYLVANIA AVENUE.

OBAMA:  I‘ll be seeing you at some ribbon-cuttings.  All right? 

(END VIDEOTAPE)

SHUSTER:  Fixing the economy versus fiscal discipline. 

Hello, everybody.  I‘m David Shuster. 

This is day 52 of the Obama administration, and today key members of the president‘s own party openly questioned the long-term reliability of the president‘s plans.  We will get to that in a moment. 

First, however, just a short time ago, the president spoke and took questions at a Business Roundtable here in Washington.  As he was doing that, Wall Street was rallying.  The Dow was closing up 240 points.  Nevertheless, the president expressed some frustration about the day-to-day scorekeeping on the economy. 

(BEGIN VIDEO CLIP)

OBAMA:  I am obviously an object of this constantly varying assessment.  I‘m the object-in-chief of this varying assessment. 

(LAUGHTER)

The market is going to be responding to all this information out there and, you know, the whole issue of animal spirits and the marketplace.  And when, suddenly, a rally catches, you know, you guys know that better than I do.  But my focus has to be on the long term.  And my long-term projections are highly optimistic. 

(END VIDEO CLIP)

SHUSTER:  For more, let‘s bring in NBC News White House Correspondent John Yang, and he‘s live from the north lawn, live from 1600. 

And John, it seems like confidence was also a theme today, confidence in terms of convincing the public that the stimulus money is going to be well spent, well tracked, but also confidence from the president that his long-term plans are solid. 

Is that what this day was about for them? 

JOHN YANG, NBC NEWS WHITE HOUSE CORRESPONDENT:  I think it‘s particularly this event, David.  Richard Parsons, the chairman of Citigroup, asked the question.  He talked about Tim Geithner, the treasury secretary, who had just been there before the president, and he said he checked off the number of times Secretary Geithner talked—used the word “confidence”.  Until, as Mr. Parsons said, he ran out of ink.  And I think the president really did try to express his confidence in the long-term future, his confidence in the long-term future if, as he said, Congress and the United States government and the White House tackles health care, tackles energy, tackles all the sorts of issues that he sent up to the Hill. 

He also addressed this question of whether or not he‘s bitten off more than he can chew, whether at this time of the troubled economy, he‘s trying to do too much.  He said, but you have to try to do all these things, otherwise the future of the economy will be in doubt.  He said that health care costs are driving down the economy, and that‘s something that has to be addressed—David. 

SHUSTER:  And John, a leading Democrat in Congress, the chairman of the Budget Committee in the Senate, Kent Conrad, expressed some concerns about the budget in terms of health care.  I want to play that for you and get reaction on the other side. 

Watch. 

(BEGIN VIDEO CLIP)

SEN. KENT CONRAD (D), BUDGET COMMITTEE CHAIRMAN:  We‘re already spending $1 in every $6 in this economy in health care.  We‘ve had testimony before this committee that as much as 30 percent of that is being wasted.  So some of us have real pause about the notion of putting substantially more money into the health care system when we‘ve already got a bloated system. 

(END VIDEO CLIP)

SHUSTER:  John, how concerned is the White House when a leading Democrat in Congress is calling the system bloated and suggesting there‘s problems with this budget? 

YANG:  Well, you know, Mr. Conrad doesn‘t like a couple of the tax policies in the budget.  Also, Robert Gibbs, the White House press secretary, during his briefing today, addressed what Mr. Conrad said—

Chairman Conrad said head on, that this was—he said, if it were broken, if the system were to continue to be broken, he‘d agree, you don‘t want to put money into it.  But he says the president wants to fix it, the president wants to trim spending in Medicare and in Medicaid, and that that‘s one reason why he wants to take this issue on this year. 

SHUSTER:  NBC News White House Correspondent John Yang live from 1600. 

John, thanks, as always.  We appreciate it. 

YANG:  Thanks, David. 

SHUSTER:  President Obama says we have to address, as John said, the long term, ,as well as the short-term, economic problems, but is the White House trying to do too much too soon? 

Joining us now is Congresswoman Allyson Schwartz.  She‘s a Democrat from Pennsylvania, and vice chairman of the Budget Committee in the House.  She‘s also the vice chair of the new Democrat Coalition.

And Congresswoman, I want to play for you what Senator Judd Gregg said today about his concerns about the budget. 

Watch. 

(BEGIN VIDEO CLIP)

SEN. JUDD GREGG ®, BUDGET COMMITTEE RANKING MEMBER:  This is a budget which has fundamental flaws.  The argument that it cuts the deficit in half in four years is truly spurious, because when you take the deficit and quadruple it, and then you cut it in half, that‘s like taking four steps back and two steps forward.  You‘re not making any progress.  You‘re still going backwards. 

(END VIDEO CLIP)

SHUSTER:  Isn‘t there a point there in terms of his view about the budget, Congresswoman? 

REP. ALLYSON SCHWARTZ (D), PENNSYLVANIA:  Well, let me first say that, as obviously, the senator knows and all of us know, is that this administration inherited from the Bush administration over a trillion-dollar deficit.  And so we didn‘t double it.  It came to us that way. 

So the fact is that, of course, particularly for the Republicans—and we want to work with them, so we hope can get this together on this, at least enough of them together to work on this—is we have got to make sure that our budget is dealt with in an early and honest way.  We have the most honest budget that I‘ve seen since I‘ve been in Congress—really being able to say what our expenses are, what our revenues are, what our obligations are in the future. 

And the president has sent us a budget that makes a commitment to cut the deficit in half in four years.  That‘s ambitious given what we‘re up against. 

SHUSTER:  But, Congresswoman, doesn‘t that also rely on some incredibly optimistic budget projections for next year and the following year?  I mean, the budget suggests that we‘re going to have a recovery next year.  If that doesn‘t happen, then aren‘t all of these projections essentially wrong? 

SCHWARTZ:  Well, budgets are always—what‘s happening right now and their projections.  And again, the president has given us a budget that projects not just five years, but 10 years.

The fact is that all the economists say to us if we do what the president has asked us to do, and what we‘ve already done over the last—well, it‘s not even eight weeks, where we are actually putting some real dollars into the economy to create jobs, that we‘re providing relief -- 95 percent of Americans are getting a tax cut, we‘re helping businesses, particularly small businesses, and, most importantly, we‘re making the investments in the future that will turn this economy around not only in the short term, but in the long term, by dealing with health care costs, clean energy, and energy independence, and, of course, education, and making sure we have a skilled workforce. 

That‘s what we know we have to do.  If we do those things, we are going to start to see this economy turn around. 

The president‘s very realistic about the fact that it‘s going to be a tough year ahead, but it will turn around.  We have the confidence that it‘s going to happen.  We now just have to make sure it does, get that budget done, get the appropriations done, and start moving this economy forward. 

SHUSTER:  As you pointed out, and a lot of others have, as well, part of the key to fixing the economy is dealing with the banks.  And there‘s now some suggestion, perhaps, that the TARP money, the initial bailout money, that that‘s going to be exhausted soon, the $700 billion is going to be out there, and that there‘s going to be more money needed.  And I want to play for you an exchange with the treasury secretary today, Tim Geithner, when he had an exchange about the mood in Congress about essentially allocating more TARP money. 

Watch. 

(BEGIN VIDEO CLIP)

SEN. LINDSEY GRAHAM ®, SOUTH CAROLINA:  Are you assuming that TARP 3 would pass this Congress to put new capital into banks? 

TIMOTHY GEITHNER, TREASURY SECRETARY:  You know, my operating assumption, Senator, is that there is widespread recognition across the country that getting the financial system back to the point where it recovers and provides credit is...

(CROSSTALK)

GRAHAM:  Do you think TARP 3 will pass this Congress if you made a request? 

GEITHNER:  Our hope is that the Congress will come together and do what‘s necessary to make sure the financial system is strong enough. 

(END VIDEO CLIP)

SHUSTER:  Congresswoman, what do you make of that?  I mean, is Geithner being too optimistic about the view of Congress in terms of giving more money to the banks? 

SCHWARTZ:  Well, I think he was pretty cautious.  He‘s being pretty careful.  And he‘s right to be. 

The fact is that we want to know that the money that is being used to stabilize the financial system in this country is used well, that it‘s transparent, that it‘s accountable.  And the fact is that the administration does have at least half that TARP money to use now, $300 billion.  The budget sets aside $250 billion just in case—and I think this is a conservative expectation—just in case the administration has to come back to Congress and ask us to appropriate it. 

I will say this, that we are not likely to do it unless there are conditions, unless we have a sense that the TARP money already used is making a difference.  We know we have work to do in the financial markets to stabilize it.  Money has to be put out there.  But the administration has a good bit of money right now to make that happen.  We‘re hoping they don‘t have to come back and ask for more. 

SHUSTER:  Congresswoman Allyson Schwartz, a key player in the budget discussions on the House side of Capitol Hill.

And Congresswoman, thanks for coming on.  We appreciate it.

SCHWARTZ:  You‘re welcome. 

SHUSTER:  One year ago, Bear Stearns collapsed.  Today, we are all paying for it. 

Up next, we will “Follow the Money” and show you the house of cards that sparked the global financial meltdown.  What have our banks learned? 

Plus, Republican National Committee Chairman Michael Steele gave another interview and is now trying to take it back.  Patience in the GOP is wearing thin yet again.  We will bring you the latest.

And we‘re taking your questions and video suggestions over Twitter. 

Just go to Twitter.com/shuster1600, or click on the link at

shuster.msnbc.com.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.

A year ago, 85-year-old investment bank Bear Stearns collapsed, setting off a global credit crisis which ravaged the banks, the credit markets, and then Main Street, in which taxpayers are now supporting in billions and billions of federal dollars that have gone to prop up struggling banks.

We‘ve been trying to determine who should be held accountable for the years of risky investments and for the dicey accounting which blew up the bubble.  Here‘s what we heard from Alan Schwartz.  The former Bear Stearns CEO testifying before Congress last spring.

(BEGIN VIDEO CLIP)

ALAN SCHWARTZ, FMR. BEAR STEARNS CEO:  I‘ve thought about a lot looking backwards and with hindsight, saying if I had known exactly the forces that were coming, what actions could we have taken beforehand to have avoided this situation, and I just simply have not been able to come up with anything, even with the benefit of hindsight. 

(END VIDEO CLIP)

SHUSTER:  Schwartz made $117 million in the five years before the bank collapsed. 

Then there‘s cigar-smoking, bridge-playing Jimmy Cayne, long at the head of Bear Stearns, who was at a bridge tournament on the weekend the bank went bust and declined to come back to deal with the problem.  Cayne pulled in $128 million in the five years before Bear went down. 

And what about Richard Fuld, the CEO of Lehman Brothers? 

(BEGIN VIDEO CLIP)

RICHARD FULD, FMR. LEHMAN BROTHERS CEO:  I have searched myself every single night, and I come back to, at the time—and that‘s why I said this in the beginning—the time I made those decisions, I made those decisions with the information that I had. 

(END VIDEO CLIP)

SHUSTER:  Fuld made $350 million before his bank collapsed in September. 

William Cohan tells the story of the absolute greed that propelled Wall Street‘s meltdown in “House of Cards: A Tale of Hubris and Wretched Excess on Wall Street.” 

And he joins us now. 

Mr. Cohan, welcome.

WILLIAM COHAN, AUTHOR, “HOUSE OF CARDS”:  Thank you.

SHUSTER:  Today you wrote a piece and said enough already with the charade of Wall Street executives pretending not to know what really happened and why. 

What did these guys on Wall Street do to cause the crisis? 

COHAN:  I mean, David, where does one start?  I mean, essentially, they ran their businesses to maximize their profits.  They found a good product that sold really well and made a lot of money for them over a number of years called mortgage-backed securities and derivatives, and all sorts of variations of mortgage-backed securities.  And without really giving much thought, unfortunately, to the risk that they were taking as they did that, they were increasingly pumping up the revenue that their firms made, and the profits that they made, and they were getting paid those numbers that you showed your viewers as we started this segment. 

SHUSTER:  I wonder if part of the problem was also that they were placing their own value, their own determination on what their assets were valued, and if that‘s perhaps a lingering problem now in that nobody can really figure out what the values are of these toxic assets, and so the banks are essentially setting their own value. 

COHAN:  Well, it‘s true that there has been very little trading in these assets over the last year.  And that‘s part of the problem, and that‘s why Treasury Secretary Tim Geithner has been taking his time to try to figure out how to set up a structure that will value these assets that are fair to the various players that either might want to buy them or the banks that might want to sell them. 

And I think it‘s also true that at the time that these securities were manufactured—because that‘s really what was going on here over many years—that people thought they were worth what they were sold at.  They thought they were worth par, a hundred cents on the dollar.  But along about the spring of 2007, there were serious cracks in that facade, and the securities became worth less and less, and the next thing you know, these banks were stuck to the gills with billions of these, and then, you know, the spiral downward began, as we now know. 

SHUSTER:  The House had a hearing about a big issue related to this.  It‘s called mark-to-market accounting.  And here‘s how Congressman Gary Ackerman of New York described it today. 

Watch. 

(BEGIN VIDEO CLIP)

REP. GARY ACKERMAN (D), NEW YORK:  If his car don‘t crank, and he unloads it because it‘s a lemon, why do I have to mark my car down?  And if someone else‘s wife runs off with the milkman and his job goes to India, and he‘s having a bad day, Bucky (ph), why is my house suddenly worth less? 

(END VIDEO CLIP)

SHUSTER:  Can you explain what mark to market is and why it is such a big deal right now? 

COHAN:  Well, essentially, it‘s Wall Street speak for what‘s a security worth.  What will somebody buy a security for that I‘m willing to sell? 

And the problem in this crisis is that, as people stop paying mortgages that they probably should never have had in the first place, the value of the security that was tied to that mortgage declined rapidly.  And as trading took place little by little, through the course of the last 18 months, new markets were established and securities firms and some banks had to mark their portfolios to those new trading prices, creating losses on their capital, in their capital accounts, and causing a lot of the problem that we now have. 

And that‘s why a lot of the securities firms and Wall Street firms don‘t like mark to market at the moment.  But I think it‘s a fair measure of what the real value of these securities is, and it‘s a worthy goal to stick to, if we can do it. 

SHUSTER:  For your book, you sat down with Jimmy Cayne, who was the CEO of Bear Stearns until he was replaced in January. 

COHAN:  Yes. 

SHUSTER:  He had some very colorful language about Tim Geithner.  Tell us about it. 

COHAN:  Isn‘t this a national TV show, a family TV show? 

Jimmy was, needless to say, extremely upset because he thought that Bear Stearns, for 85 years, had proved its mettle in the marketplace, and he never conceived of for a second that his firm would not be creditworthy.  But essentially, that is what Tim Geithner was saying. 

Tim Geithner, at that time, head of the New York Fed.  As one of the central bankers in this country, it was his judgment, as he said in testimony to Congress, and he said to me, that he did not think the firm Bear Stearns was creditworthy, worthy of the bank in New York—the Federal Bank in New York lending money to that firm, and that‘s why he didn‘t do it. 

Now, when he then opened the discount window to other securities firms on the Sunday night after Bear had been sold to JPMorgan, well, that upset, rightly so, perhaps, a lot of people at Bear Stearns who thought he should have done it before, so that when I got around to talking to Jimmy Cayne about it two or three months later, he was still steaming mad and he let loose with a tirade against the now-treasury secretary. 

SHUSTER:  William Cohan.  The book is called “House of Cards: A Tale of Hubris and Wretched Excess on Wall Street.”  A terrific read. 

And William, thanks so much for coming in tonight.  We appreciate it. 

COHAN:  Thanks for having me, David.

SHUSTER:  You‘re welcome. 

Coming up, South Governor Mark Sanford has a 10.4 percent unemployment rate.  His state needs help.  So why does he want to use his cut of the stimulus money to pay down the state‘s debt instead of creating jobs? 

Sanford‘s argument lands him in “Hypocrisy Watch.”  That‘s up next on 1600. 

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.

The Obama administration is in the process of dispersing money from that $790 billion stimulus bill Congress passed a few weeks ago.  South Carolina Governor Mark Sanford is now asking to redirect part of the money going to his state, and that takes us to tonight‘s “Hypocrisy Watch.”

First, the background. 

South Carolina is due to receive $2.8 billion in stimulus money aimed at creating or saving jobs.  This week, Governor Sanford announced he will seek a waiver to use part of the money his state will control, $700 million, to lower the state debt instead of putting it towards spending. 

Here‘s part of the governor‘s argument. 

(BEGIN VIDEO CLIP)

SANFORD:  We don‘t think it‘s a good idea to spend money that you don‘t have.  We don‘t think it‘s a good idea to spend money that you don‘t have at a personal level.  We don‘t think it‘s a good idea to spend money that you don‘t have at a state government level, or, for that matter, a federal level. 

(END VIDEO CLIP)

SHUSTER:  The problem is that South Carolina has been spending money it doesn‘t have for a long time.  According to the Tax Foundation and census figures, for years South Carolina has been spending far more federal funds than it contributes in taxpayer dollars. 

In 2005, the most recent year available, for every dollar South Carolina contributed to the federal Treasury in taxes, South Carolina got $1.31 back from the federal government to spend.  It‘s true that some of this related to federal mandates, but some of it did not.  South Carolina‘s unemployment figures now over 10 percent, the second worst in the nation and behind only the state of Michigan. 

Governor Sanford clearly believes that his state‘s long-term fiscal health depends on a sound balance sheet, not the immediate creation of jobs.  Many Republicans and Democrats in the state disagree.  Nonetheless, Governor Sanford‘s argument is interesting. 

However, Governor, when you take that argument and then add that it‘s terrible to spend money you don‘t have in your state, that‘s hypocrisy, and it‘s wrong. 

Coming up, the pressure is starting to build on President Obama and Treasury Secretary Geithner to get the economy back on track.  And congressional frustrations with Geithner are growing.  Can he survive? 

We will ask Roger Altman, former deputy treasury secretary for President Clinton. 

Plus, throwing a shoe at George W. Bush or any world leader is usually a bad idea.  Today, the Iraq shoe-thrower found out how much trouble he‘s really in. 

This is 1600 PENNSYLVANIA AVENUE.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA:  Let me say it was not my preference, believe it or not, to launch my administration by passing the largest economic recovery plan in the nation‘s history or to face crises in the financial market and the automobile industry.  But that‘s the duty I signed on for.  And although my administration did not create these problems, it‘s not only my responsibility but my extraordinary privilege to help solve them. 

(END VIDEO CLIP)

SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE. That was President Obama this afternoon addressing business leaders at a summit meeting here in Washington.  The president, again, stressed the economic crisis is something his administration inherited, but pressure is building for the president and his Treasury secretary to show that their economic plans will revive the economy. 

Timothy Geithner was on the Hill today defending the president‘s budget and stimulus proposals.  But in the halls of Congress and on trading floors, there is rising concern about whether Geithner is the right man to restore confidence.  Today, White House Press Secretary Robert Gibbs was asked about Geithner‘s lagging credibility on the financial market. 

(BEGIN VIDEO CLIP)

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY:  The administration is not here to win a popularity contest among economists that are interviewed by a newspaper.  The president has great confidence in his economic team. 

(END VIDEO CLIP)

SHUSTER:  Gibbs was referring there to a “Wall Street Journal” survey of economists that gives both President Obama and his Treasury secretary a failing grade for their efforts to revive the economy.  On average, economists surveyed gave the president a grade of 59 out of 100, and Mr.  Geithner received an average grade of 51.  With Geithner‘s job possibly in jeopardy, never mind those grades, as one paper is suggesting today, is the president‘s honeymoon already fading? 

We‘ll ask our panel about that, Chris Kofinis, Chris Cillizza, and Michelle Bernard. 

But First, Roger Altman was deputy Treasury Secretary under President Clinton.  He is now chairman and CEO of Everett Corps Partners.  Mr.  Altman, welcome. 

ROGER ALTMAN, FMR. DEPUTY TREASURY SECRETARY:  Hi, David. 

SHUSTER:  You were in the Treasury department.  You have first-hand knowledge of how it works.  How important are communication skills to the job that Tim Geithner has? 

ALTMAN:  They are important, but I think the idea that we now know enough to judge the likely success of the administration‘s initiatives is preposterous, and the idea that Tim Geithner doesn‘t have what it takes or won‘t be successful in the job, also, I think is short-sighted and unsound. 

I happen to think he has a lot of talent.  I think he‘s very good.  I think these initiatives, and there are four huge initiatives they‘ve rolled out in less than 50 days, are going to be effective, and that history is ultimately going to judge the job that the authorities have done, both under Bush and under the new president, since the onset of this crisis to have been swift and effective in the medium and long run, in that basic American tradition of action and decisiveness. 

SHUSTER:  Wasn‘t a—I mean a key part of this is fixing the banks.  And if you look at the way the market took a nosedive on the day Tim Geithner was essentially put out as the point man on this, and unveiled a plan that was very short on details.  The market hated it.  And ever since then, there seemed to have been a confidence problem with Tim Geithner.  Until there actually are some details on this banking plan, isn‘t that a problem for the Treasury secretary? 

ALTMAN:  First of all, as I understand it, the details are going to be rolled out quite soon.  Second of all, having started on Wall Street almost exactly 40 years ago, no one precisely knows why markets rise and fall, rise or fall on a particular day or in a particular hour, and although there are hundreds of people whose job it is to prognosticate about why actually this happened or that happened in the market, actually no one really knows.  And it‘s not necessarily correct to say that the market hated the plan. 

The market cares about the bottom line results.  And no one thinks that the public-private investment partnership, which you‘re referring to, which is extraordinarily complex, huge endeavor, should have been started up the day after Tim Geithner revealed it.  No one thinks that, at least no one thoughtful. 

So as an example, the Talf, so-called Talf, which is addressed at reopening the securitization market for auto loans and consumer loans and so forth, was announced last November.  And it‘s beginning its operations in the next few days, about four or five months later.  These things take time. 

To be honest with you, David, smart people know that.  So rendering these judgments is not just premature.  It‘s pretty unsophisticated. 

SHUSTER:  Well, as unsophisticated as a lot of people may be, a lot of people took notice when Tim Geithner was asked on PBS about whether capitalism will be different and here‘s how he responded.  Watch. 

(BEGIN VIDEO CLIP)

CHARLIE ROSE, PBS ANCHOR:  Will capitalism be different? 

TIMOTHY GEITHNER, TREASURY SECRETARY:  I think capitalism will be different, and the financial institutions will be dramatically different.  It already is dramatically different.  But I think it will emerge stronger.  This will clean out a lot of the excesses and bad practices.  And those that don‘t get cleaned out just by experience and knowledge now, better regulation, oversight, better rules of the game, enforced more cleanly, we‘ll fix. 

(END VIDEO CLIP)

SHUSTER:  Mr. Altman, who is the point person for the Obama administration on the economic problems right now, putting aside the president. 

ALTMAN:  I think it‘s co-headed by Larry Summers and Tim Geithner. 

SHUSTER:  And isn‘t that a problem right there?  I mean, Larry Summers is famous for not getting along with people.  A lot of people think that Tim Geithner doesn‘t have the speaking ability or communication skills to essentially assuage the markets and investors who say, wait a second, what is the plan here? 

ALTMAN:  David, I don‘t think it‘s a problem.  In the first Clinton term, the economic policy was co-headed, at least the first two years, by Lloyd Benson and Bob Ruben, two very strong figures, very, very able figures.  They got along fine.  They shared responsibility fine.  And it worked quite well. 

I don‘t see any reason why this won‘t work in a similar way.  No, I don‘t think the very nature of it is a problem, no. 

SHUSTER:  All right.  Roger Altman, we appreciate you coming on.  It‘s an important issue.  And we‘re glad you were here to discuss it with us tonight.  Thank you. 

ALTMAN:  Thank you. 

SHUSTER:  Let‘s turn to our panel now for their reaction on Geithner and the job he‘s doing at Treasury.  Veteran Democratic strategist Chris Kofinis, “Washington Post” White House reporter and author of “The Fix,” Chris Cillizza, and MSNBC political analyst and president of the Independent Women‘s Forum, Michelle Bernard.  Thank you all. 

I think this is an issue that‘s seeping into pop culture in a way that may not be helpful to the Obama administration.  Here‘s an example.  Here‘s “Saturday Night Live” and their portrayal of Tim Geithner.  Watch. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  Good evening.  I‘m Timothy Geithner, United States secretary of the Treasury.  Earlier today I proposed that the federal Treasury set aside 420 billion dollars.  This 420 billion dollars will be placed in a special fund and will go to the first individual who comes up with a workable plan to solve the banking crisis. 

If you have such a plan or know of someone who does, you can call the number on the screen below. 

(END VIDEO CLIP)

SHUSTER:  Michelle Bernard, the reason that worked is because a lot of people feel that way. 

MICHELLE BERNARD, MSNBC POLITICAL ANALYST:  Exactly.  That skit is reflecting the way I would say the vast majority of the American public feels.  Number one, who is in charge?  Number two, what‘s the answer?  What exactly are you doing?  We‘re hearing so much about the economic downturn, the loss of jobs.  Then there‘s health care reform and energy independence and one thing after another.  And I think people are scratching their heads and saying, do you have any idea what you‘re doing and how are you going to fix this?  That‘s why “Saturday Night Live” in this instance works. 

SHUSTER:  Chris Kofinis?

CHRIS KOFINIS, DEMOCRATIC STRATEGIST:  It‘s he‘s pretty unfair, to say the least.  I mean, fixing a multi-trillion dollar economy is not like ordering a pizza, especially one when you‘re talking about a series of financial crises on multiple levels, whether it‘s the financial industry, the auto industry, the foreclosure crisis.  I mean, so you‘re talking about a series of complex problems that this administration inherited from the previous administration.  And they‘re trying to basically manage them at the same time.  That‘s going to create some frustration. 

The problem is, I think people need to kind of step back, have patience.  They‘ve been in power for 50 plus days.  The notion that somehow President Obama and Secretary Geithner should come in and wave their magic wand and fix this economy that took, you know, eight years for President Bush to help basically destroy, I think is completely unrealistic. 

SHUSTER:  Except, Chris Cillizza, Tim Geithner, a lot of people would point out, was essentially part of the problem, in terms of when the economy started going down to begin with.  And when you take a look at the examples that Roger Altman raised, Lloyd Bentsen and Bob Rubin, and then you look at Lawrence Summers and Tim Geithner, it doesn‘t seem like an equivalency there. 

CHRIS CILLIZZA, “THE WASHINGTON POST”:  David, I don‘t disagree with anything Chris Kofinis just said, except for the fact that—and this goes with Mr. Altman, as well—this is a political matter, like everything in the political arena.  It‘s a policy matter, but also a political matter.  In politics, there is the reality and then there is the perception. 

Perception oftentimes is more important and can create and shape reality. 

The perception out there is that Tim Geithner is a little bit ineffective.  I think he got off on the very wrong foot when he first introduced that bank rollout plan. 

That perception is hurting the Obama administration.  I don‘t think Chris Kofinis is wrong.  Yes, it is a complex problem.  Yes, the American public do need to have patience.  But we know from past elections, from past big policy fights, the American people have patience right up until they don‘t anymore.  So I think the Obama administration knows that they are in some ways playing with borrowed time.  They‘re only going to have so much time to make this case that we need to make these huge, wholesale changes that are costing billions and trillions of dollars, before the American public may turn that corner.  And that‘s very dangerous for them. 

SHUSTER:  Last word. 

BERNARD:  I just want to add, I don‘t think anyone here is wrong.  But it is a huge communication problem.  Barack Obama is the master at communication.  He‘s used the word inherited, that Chris just used, over and over again.  But we‘re not seeing that from Tim Geithner.  For people who own their own mom-and-pop shop somewhere in Scranton, Pennsylvania, for example, you know, the kind of things that we‘re talking about, about markets and this and that, those people don‘t want to hear that.  They want to be communicated to in a way that gives them some sort of psychological feeling that we are going to come out of this and come out of it whole.  I think a lot of people are not getting that from Tim Geithner right now. 

SHUSTER:  Michelle Bernard, Chris Kofinis and Chris Cillizza are sticking with us.  Up next, there is a fascinating new poll out today about Congress.  And it suggests a huge problem for the GOP.  The message from Rush is pushing the Republican party down. 

And your Twitter questions coming up at the end of the hour.  Just go to Twitter.com/Shuster1600 or use the link at Shuster.MSNBC.com.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA:  There are those who believe that government doesn‘t have a role to play in this recovery.  There are those who believe that we should be focusing exclusively on Wall Street when it comes to this crisis, and that we don‘t have time to worry about infrastructure and we don‘t have time to worry about our health system. 

SEN. MITCH MCCONNELL ®, MINORITY LEADER:  Suspension bills on the floor of the House while Rome burns?  Can we really be talking about a cap and trade proposal or a government takeover of our health care system while our economy is collapsing? 

(END VIDEO CLIP)

SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE.  That is the debate in Washington right now.  President Obama says the crisis is an opportunity to work on long-term problems, while Republicans claim that Democrats are exploiting the crisis to pass a sweeping liberal agenda.  But is just say no a viable strategy for the GOP?  Let‘s put it to our panel, Democratic strategist Chris Kofinis, the “Washington Post‘s” Chris Cillizza, and MSNBC political analyst Michelle Bernard.

Chris Kofinis, John Boehner suggested last week that there just ought to be a freeze on new spending.  Your reaction? 

KOFINIS:  Complete misunderstanding of the scope of the crisis we face.  I think what is actually very smart and sophisticated about what President Obama and the administration are doing is they realize that these problems that we‘re facing are inter-connectable, short term and long term.  You need short-term solutions, like the stimulus, like the foreclosure—dealing with the foreclosure crisis, but also long-term solutions, in terms of dealing with health care and education, and that you can‘t put them off. 

We spent decades in Washington talking and making excuses as to why we should put off things.  The problem that Republicans have, I call these Madoff Republicans, because they promise you the world and then you end up realizing it‘s all a Ponzi scheme, because the reality is it is going to cost us something.  But it‘s going to save us in the long run, both in terms of an economy and as a country.  I think it‘s going to make us better and stronger. 

SHUSTER:  Chris Cillizza, does it really matter if the Republicans are the party of ideas or not right now?  When you think about it, they‘re the opposition party.  They don‘t really have much power.  It‘s not as if somebody is depending on them to contribute to the debate. 

CILLIZZA:  Well, I do think it‘s important that they contribute in some way to the debate, but there needs to be a recognition, and I think Republican strategists admit this privately, that Barack Obama has a bull horn and Republicans are a mouse, sort of squeaking and yelling and trying to get their voices heard.  Barack Obama has the bully pulpit.  When he goes out and says something, gives a speech, travels somewhere, appears at a town hall, it‘s national news.  It‘s the lead of newscasts. 

When John Boehner or Mitch McConnell, the leaders in the House and Senate respectively, on the Republican side, say something it might get in the newspaper.  It might get covered, but it might not too.  I do think, though, look at the last time Republicans were in a similar position, early 1990s.  They came back not simply because they effectively cast Democrats as—that they had been in power too long.  They also came back on the strength of not just one man, but Newt Gingrich at the center of it as an ideas factory, that Republicans could do it better. 

They‘re going to have to make that case.  I don‘t think they‘re going to be able to do it in the next two years that effectively.  But over the next four years, make the case that Republican ideas can better handle the kind of crisis we‘re facing than what Barack Obama is putting forward. 

SHUSTER:  Paul Krugman, by the way, weighed in on this Boehner idea of freezing spending.  I‘m going to run that in just a second.  But first, Michelle, your quick point on what Chris was just saying? 

BERNARD:  With regard to what John Boehner said, every question he asked is an absolutely legitimate question.  Polls would tell you most Americans are asking the same thing.  Can we afford to do all of this while jobs are being hemorrhaged all throughout the nation? 

That being said, I think the Republican party has an image problem.  It does have to be more than the party of no.  The Republican party I think needs to find a way to adapt to the way the nation is today and come up with a message that resonates with the American public and also come up with answers to the problems that we‘re facing, so that Democrats and Republicans can meet, find some common ground, and forge ahead. 

(CROSS TALK)

CILLIZZA:  I just want to say very quickly one person to keep an eye on, John Huntsman, the governor of Utah, a Republican.  He just signed four bills today that expand health care in Utah.  Not your typical Republican.  Just keep an eye on him, to Michelle‘s point about needing new fresh ideas and fresh faces.  Sorry to interrupt.

SHUSTER:  That‘s all right.  On the idea of freezing spending, here‘s what Paul Krugman said on this program earlier this week.  Watch. 

(BEGIN VIDEO CLIP)

PAUL KRUGMAN, “THE NEW YORK TIMES”:  We‘re right now in a situation which is known as the paradox of thrift.  Everybody is trying to save more, which makes sense for an individual.  But when everybody does it at the same time, you know, it destroys the economy and makes everybody worse off. 

What Boehner is saying is let‘s get the government in the act as well.  Let‘s make sure that the same problems that are afflicting the private sector now spread to the public sector and let‘s make this recession worse.  It‘s astonishing.  It‘s as if the last 80 years of economic thought have just passed them by. 

(END VIDEO CLIP)

SHUSTER:  That does seem, at least to me, to be the problem the Republicans have right now.  You have a Nobel Prize-winning economist who is making the point that Republicans have no idea what the Republicans are talking about.  And then you have John Boehner who has his own issues.  In any case, the panel is sticking around, Michelle, Chris, and Chris.  Coming up, the evidence is out there, but will the Obama administration release it to the public?  Up next, how a story about space aliens and a farmer‘s cow in Colorado may ultimately collide back at 1600 PENNSYLVANIA AVENUE.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.  There‘s a lot going on today.  Here are a few things I thought you should know.  Remember that infamous Iraqi reporter who hurled his shoes at former president George W. Bush?  He‘s going to jail.  Today, a Baghdad court sentenced the man to three years in prison.  When the sentence was read, the journalist shouted, long live Iraq, and said his action was a natural response to the occupation. 

Up next, if you want to get your hands on former President Bill Clinton‘s iPod, you are now out of luck.  As we first told you on 1600, the former president is participating in a celebrity fund raiser to help Gulf coast musicians replace instruments lost during Hurricane Katrina.  The red iPod nano has Clinton‘s signature on the back.  Inside a specialty play list with songs like “Bridge Over Troubled Water” and “Brown Eyed Girl.”

Bidding on eBay ended almost five hours ago.  The winning bid was 2,246 dollars. 

Finally, several organizations have been asking the Obama administration to release government documents and reports related to claims about unidentified flying objects.  At the moment, it appears the request is under review.  But maybe it will be speeded up a bit when the administration hears what happened to a farmer in eastern Colorado. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  We have other life out there and I think that‘s what it is. 

(END VIDEO CLIP)

SHUSTER:  That‘s rancher Mike Durand (ph).  He found a missing cow of his dead along the Purgatory River, near Trinidad, Colorado.  Durand is convinced aliens abducted his cow, removed some organs, then dropped the animal into the river, before flying away in their UFO. 

Why does he think that?  Apparently, the cow had its udders cleanly cut off, with no blood on or around her body.  Durand says, quote, “it was a perfect circle, almost like a laser cut.  It‘s not like a knife.  It seemed to be cut and sealed at the same time.” 

What‘s more, this isn‘t the first time this has happened to Duran‘s cows.  Another one was mutilated on the same field in the same fashion in 1995.  Police are investigating both incidents. 

Now back to the White House link to UFO sightings.  John Podesta, the chief of President Obama‘s transition team, has been a strong supporter of releasing UFO documents.  Here‘s what he said in 2002. 

(BEGIN VIDEO CLIP)

JOHN PODESTA, FMR. CHIEF OF STAFF TO PRESIDENT CLINTON:  It‘s time to find out what the truth really is that‘s out there.  We ought to do it really because it‘s right.  We ought to do it because the American people, quite frankly, can handle the truth.  And we ought to do it because it‘s the law. 

(END VIDEO CLIP)

SHUSTER:  There you have it, team Obama.  What‘s the hold up?  Does the government possess documents that might refer to other bizarre and unexplained cow mutilations?  Farmer Mike in Colorado is waiting. 

And it‘s Twitter time now.  Before we bring back our panel, a Twitter time update.  Bush legacy burnishers are working overtime via Twitter.  First is Karl Rove, who apparently has a quite of bit of his own Twitter time on his hands now that he‘s no longer at 1600. 

Recently, “Politico” named him their number one Twitterer, and yesterday he responded. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  We named you number one Twitterer.  How do you feel? 

KARL ROVE, FMR. ADVISER TO PRESIDENT BUSH:  It‘s weird man.  I‘m still trying to figure out the whole Twittering thing and I get named number one.  I‘m a complete novice. 

UNIDENTIFIED MALE:  Everyone wants to know, can you get George Bush to Twitter? 

ROVE:  No. 

UNIDENTIFIED MALE:  Really? 

ROVE:  No. 

UNIDENTIFIED MALE:  Facebook. 

ROVE:  No. 

UNIDENTIFIED MALE:  E-mail? 

ROVE:  Yes, e-mail, lots of e-mail. 

UNIDENTIFIED MALE:  That‘s it. 

ROVE:  Lots of e-mail, but not Facebook. 

(END VIDEO CLIP)

SHUSTER:  Let‘s welcome back the panel, Chris Kofinis, Chris Cillizza and Michelle Bernard.  The way this works is we get videos and questions.  Let‘s do the video first.  One is bad.  Ten is good.  Here‘s the one from Red State Update.  Watch. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  Our beloved Republicans are in disarray, crying out for a leader.  Who will it be? 

UNIDENTIFIED MALE:  What about old Rush Limbaugh. 

UNIDENTIFIED MALE:  No.  Rush is good at talking up Republicans and beaming Republican‘s greatest hits into millions of households, but he ain‘t the leader of Republicans.  It‘s like saying Casey Casum (ph) is the leader of Journey, when we all know it was Neil Shaw (ph). 

Republicans, I give to you your new leader: Jackie Brawls. 

UNIDENTIFIED MALE:  Oh, good. 

UNIDENTIFIED MALE:  I thought you‘d be mad. 

UNIDENTIFIED MALE:  I am mad, but for a moment I thought you were going to say McCain. 

(END VIDEO CLIP)

SHUSTER:  The punch line is good.  I give that a seven.  Chris Cillizza? 

CILLIZZA:  Five.  But that‘s only because I really like overalls. 

KOFINIS:  I give that an eight, because I think we just saw the future RNC chairman. 

SHUSTER:  Michelle Bernard? 

BERNARD: I give it an eight.  Thoroughly entertaining.  I have no idea what they were saying.  But thoroughly entertaining.

SHUSTER:  Here are some of the Twitter questions.  Somebody wants to know, Chris Kofinis, do you believe in UFOs? 

KOFINIS:  Yes, I do, David.  In fact, I believe that Michael Steele Is an alien from another planet. 

SHUSTER:  Speaking of Michael Steele, there is a serious question for you, Michelle.  Is he going to survive?  Michael Steele has said contradictory things about abortion rights.  He had to backtrack.  What‘s going to happen? 

BERNARD:  I think he‘s got a tough road ahead, but he‘s going to ultimately survive.  He‘s only been on the job a very short period of time.  I think he‘s learning his way in the national spotlight.  And he survived being lieutenant governor of Maryland, a Republican in a Democratic state.  He will survive this. 

KOFINIS:  Michael Steele is a car accident.  Every interview he does, he just further digs a deeper hole. 

SHUSTER:  Twitter question for you, Chris Cillizza, somebody wants to know when is the appropriate time to judge Tim Geithner? 

CILLIZZA:  You know, I think people are judging him right now, and I think the appropriate time is when people find it appropriate.  I do think that the reality of this is that it‘s a massive change that they are trying to usher in in the economy.  It is going to take a year, two years, five years to know.  But the political calendar doesn‘t work like that.  In 2010, we will have a judgment rendered on whether the economic policies put in place by Barack Obama‘s administration were successful or not successful.  That‘s just how the political calendar works. 

SHUSTER:  Chris Cillizza, Chris Kofinis, Michelle Bernard, a terrific panel.  Thank you all.  We appreciate it as always.  That is the view from 1600 PENNSYLVANIA AVENUE.  I‘m David Shuster.  Remember, you can always get updates and join the 1600 online community.  Just go to Shuster.MSNBC.com.  I‘ll be Twittering after the show, Shuster1600. 

I‘m David Shuster.  “HARDBALL” starts right now. 

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

END   

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