updated 3/13/2009 10:32:58 AM ET 2009-03-13T14:32:58

Guest: Walter Griffin, Joe Cirincione, Sam Stein, David Weidner, Kent Jones

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

After AIG took bailout money, you will recall, their executives went on an all-expenses paid spa week at a resort.  Then, they hired lots of PR firms to make us feel better about them.

After Bank of America took bailout money, they hosted conference calls to lobby against making it easier to join a union in this country.  Now, Citigroup is doing the same thing.  Sam Stein has got the story and he is here this hour.

And Democrats in the Senate form their traditional circular firing squad.  We‘ve got a strategy memo for them coming up this hour.

But, first, the phrase “dirty bomb” has been used a lot in this country in the last eight years.  After 9/11, it became a national nightmare that the next attack might have a radioactive component.  From public anxiety in the Cold War about Russia hitting us with a nuclear missile or dropping a nuclear bomb on us, we moved on to new public anxiety about some extremist, nihilist terrorist group exploding the very distant cousin of a nuclear weapon in this country—using a conventional explosive, something like dynamite, to disperse radioactive material, it‘s a dirty bomb.

If you think dirty bomb, don‘t think mushroom cloud, think panic, think terror.  It‘s an attack designed to kill, sure, but also, to get in our national psyche and to terrify us.

One of the most high-profile terrorism arrests of post-9/11 era was Jose Padilla, a U.S. citizen picked up at Chicago‘s O‘Hare Airport.  He was charged loudly and repeatedly by Bush administration officials with having plotted to set off a dirty bomb in an American city.  Now, Mr. Padilla was never charged with any such thing.  He went to jail ultimately on totally unrelated charges.

But that did not stop Bush administration officials from touting the supposedly thwarted dirty bomb attack again and again and again and again, because of its power even in the abstract to terrify us.

And that brings us to the new American dirty bomb news that worryingly is not totally abstract.  On December 9th, in the small town of Belfast, Maine, which is between Bangor and Portland, police responded to an emergency call.  Thirty-one-year-old Amber Cummings have reportedly shot and killed her husband, James, after what she says were years of mental, physical and sexual abuse—allegations seemingly corroborated by tradesmen who had done work in the home and who had described James Cummings as abusive and his wife as cowering in his presence.

Upon entering the home, police reportedly found material linking Mr.  Cummings to white supremacist groups, including an application he had filled out to join the National Socialist Movement, and yes, that‘s national socialist as in Nazi.

Mr. Cummings had told neighbors he was a Nazi.  He had bragged about his admiration for Adolf Hitler.  He had bragged about owning Nazi memorabilia, including Hitler‘s cutlery and place settings.  What kind of self-respecting Nazi collects place settings?  Dessert spoons?

Anyway—Amber Cummings reportedly also told police that her husband was, quote, “very upset” when Barack Obama was elected president.

Now, the reason this isn‘t just a dead jerk story, a domestic violence story, a local extremist gone bad story, is because of what else was found in James Cummings‘ house.  According to a leaked document from the Washington Regional Threat and Analysis Center, “State authorities detected radiation emissions in four small jars in the house.”  They were labeled “uranium metals” as well as one jar labeled ‘thorium.”

In addition, authorities found four one-gallon containers of 35 percent hydrogen peroxide, so you know, that‘s the formulation of that chemical that you need for peroxide-based explosives.  Also, they found lithium metal, thermite, aluminum powder, beryllium, boron, black iron oxide, and magnesium ribbon.  The FBI also noted the presence of literature about how to construct a dirty bomb.

Did Mr. Cummings construct a dirty bomb?  No, he did not.  Does he still pose any sort of threat to anyone including his wife?  No.  He was very, very dead.  Mrs. Cummings has pled temporary insanity against the murder charges that are pending against her in Maine.

But should this guy have been found out, I don‘t know, before he died and post-9/11, have we focused too much on stopping bin Laden again at the expense of potentially stopping the next Timothy McVeigh?

Joining us now is Walter Griffin, bureau chief for the “Bangor Daily News” in Bangor, Maine.  He‘s been covering this story as it has unfolded.

Mr. Griffin, thank you so much for coming on the show tonight.

WALTER GRIFFIN, BANGOR DAILY NEWS BUREAU CHIEF:  Thank you for having me on, Rachel.

MADDOW:  First of all, let me give you the opportunity to correct the record, if I—in terms of what I‘d just explained there.  Have I correctly summarized the sequence of events in Belfast as you understand them?

GRIFFIN:  Yes, you have.  They‘re very accurate.

MADDOW:  Has there been concern locally that this did not get—that this did not get discovered until Mr. Cummings was already dead?  Has that been a local concern?

GRIFFIN:  You know, it really hasn‘t.  People mentioned it, but, you know, Maine is—people have always had a lot of explosives around and firearms.  It‘s a hunting state.  And there wasn‘t really that much concern, surprisingly.  I mean, a lot of people were, you know, surprised that it happened but didn‘t seem that concerned, really.

MADDOW:  Explosives and firearms but like, Hitler‘s cutlery and how to make a dirty bomb manual, and, I don‘t know, depleted uranium.  I mean, that‘s not run of the mill hunting or a hunting family kind of stuff.

GRIFFIN:  No, it wasn‘t.  And I know the police were very concerned.  But some of the people I spoke to that lived around him in the neighborhood, they, obviously, were concerned.  Other people in the town and the city just said, you know, they were just kind of going about their business.

MADDOW:  Mr. Griffin, it seems like .

GRIFFIN:  And it surprised me.

MADDOW:  It seems like the white supremacist and scary chemicals part of this has pretty much been turned over to the FBI, got turned over to the Feds fairly quickly.  I wonder, for you as a local reporter trying to cover this story, trying to cover the main angle of this—does that making it harder for you to report on?  I mean, have the authorities been talking to you about this?

GRIFFIN:  No, they haven‘t really.  And they never did from the beginning.  You know, we had heard rumors about these things and asked the police, and they basically said it was a complicated case.  They had impounded all the search warrants, which is quite—it‘s not unheard of, but it‘s rare.  And they even impounded the autopsy report.

So, you knew something was there, that and the fact that they spent about three days, you know, combing through the house.  And they rarely do that on a murder scene as well.  So, it seems to me that something was in that house that they were very interested in.  They had a lot of trucks, a lot of cars, a lot of, you know, police officers, and guys in—not the hazmat uniforms but coverall type things.

So, and after having heard these rumors so basically, we knew something was in that house.  We didn‘t know it was radioactive.  But we thought more of hazardous materials, maybe some kind of a chemical weapon that he had in mind.

MADDOW:  Mr. Griffin .

GRIFFIN:  And the .

MADDOW:  Sorry, go ahead.  Continue.

GRIFFIN:  Go ahead.  No.  That‘s fine.

MADDOW:  I was going to mention .

GRIFFIN:  (INAUDIBLE)

MADDOW:  OK, I‘ll go.  I‘m sorry there is a delay between us that‘s making this awkward.  I‘m sorry.

GRIFFIN:  That‘s OK.

MADDOW:  One of the things that is really central to counterterrorism work in general is trying to follow the financing, trying to choke off terrorist financing.  One of the really interesting things of this story—one of the interesting details is that Mr. Cummings didn‘t work.  He is sort of bizarrely, he was independently wealthy.

And I wonder, if trying to cover this in terms of how much of a threat he might be to the local population, what kind of guy he is, if he‘s having access to reportedly millions of dollars in this trust fund might have made a difference in how serious this case was?

GRIFFIN:  I think it would have.  And I—you know, we don‘t know the quantities of these materials.  We know he had the money.  We know he could buy things.  He had, you know, expensive furniture in the house, I understand, and a lot of, you know, wealthy furnishings and things like that.  So, he definitely had access to money.

And he was—he and his sister I believe were the sole inheritors of a trust of his father‘s, out in California, which is several million dollars.  And he had a steady income from that.

MADDOW:  And, of course, the truly crazy “life weirder than art” detail of that is that the reason they benefited from that trust is because Mr. Cummings‘ father was also murdered in California under totally unrelated circumstances.

Walter Griffin, bureau chief for the “Bangor Daily News” in Bangor, Maine—it‘s really nice for you to take time out to talk to us tonight.  Thank you.

GRIFFIN:  Thank you, Rachel.

MADDOW:  Joining us now to try to put this in some context is the guy who I turn to when I need level-headed perspective on all things bomb-related and radiation-related—Joe Cirincione.  He‘s president of the Ploughshares Fund.  He‘s the author of “Bomb Scare: The History and Future of Nuclear Weapons.”

Joe, thanks so much for being here.

JOE CIRINCIONE, PLOUGHSHARES FUND PRESIDENT:  My pleasure, Rachel.

MADDOW:  Just to get out of the way, right at the top of it, right off the top here, please explain the difference between a nuclear weapon and a dirty bomb.

CIRINCIONE:  Sure.  Nuclear weapon is an explosive device that emits a large amount of blast radiation and heat.  It‘s your mushroom cloud.  A dirty bomb is not a nuclear explosive.  It is basically a terrorist device, for example, a truck bomb, a car bomb laced with radioactive particles that will disperse over 10 square blocks and irradiate those—that amount of territory.  It doesn‘t actually kill anyone immediately, what it does is poison the territory, contaminate the territory, make it hazardous for anybody to go back to the buildings or space.

MADDOW:  Joe, from the publicly available information about this case, can you tell whether or not James Cummings had amassed enough material to make any sort of credible dirty bomb?

CIRINCIONE:  This was sort of a starter kit can for a dirty bomb.  He

clearly, he was trying to put together the explosive part of it.  The radio active material wouldn‘t have caused much radiation damage.

This was fairly low level stuff, uranium, beryllium, thorium—yes, these are dangerous materials.  Beryllium if inhaled, for example, will give you lung disease.  But nothing like what he really needed.

What‘s disturbing is that he had material on cesium-137, on Cobalt-60.  These are the highly radioactive sources, the classic dirty bomb.  A few grams of this in an explosive device could contaminate 20, 30 square blocks.

MADDOW:  And he had information about those materials, but he didn‘t have those materials themselves.

CIRINCIONE:  That‘s exactly right.  So, the question is, if he had more time, could he have gotten that?  Could he have posed a serious risk?

MADDOW:  Joe, the Maine public safety commissioner says that, technically, all the stuff that was found in this guy‘s house could be purchased legally.  Is that generally the thing we need to understand about the dirty bomb threat?  That anybody who really wanted to accumulate the materials for it could, given the money, time and patience?

CIRINCIONE:  That‘s exactly right.  So, what you‘re really worried about here is not only that this guy was a white supremacist but he was a trust fund dirty bomber.  As Jeffrey Lewis says on his blog, he had money.  So, therefore, you could imagine him setting up various scenarios where he could legally purchase, say, medical devices, with cesium-137.  One medical gauge full of cesium-137 could have been all he needed for a dirty bomb.

So, yes, there was real cause for worry in this first ever actual dirty bomb case in America.

MADDOW:  Most important question here, then, Joe—given the availability of the necessary ingredients, even the scariest ones, what‘s the counter-proliferation strategy here?  Can there be one?

CIRINCIONE:  Well, what you are worried about is that someone with a device like this would contaminate 10 square blocks of, say, Washington and paralyze the city or financial district of New York or London for that matter, and cause a real panic.  So, the only way to stop this is to prevent people from getting that radioactive material in the first place.

What you want to do is—number one, reduce.  A lot of the material we‘re talking about does not have to be used.  Americium, for example, is in our smoke detectors.  Why do we use radioactive material in smoke detectors?  Stop it.  Use other mediums (ph).  Cesium itself could be used, with other non-radiological materials that could be used.

The second is to secure this material.  Increase the verification procedures for people getting the material, to cradle to grave, surveillance in this material, and make sure that we have secured all the available materials in their original sources.  You are not so much worried about people buying a bunch of smoke detectors, you‘re worried about people going to the source, the smoke detector factory and stealing or requiring that material.

So, reduce, secure, those are your two main counters to this threat.

MADDOW:  Joe Cirincione, president of the Ploughshares—Ploughshares is a global security funds.

You always make me feel both simultaneously worse and better about these things.  I feel like I understand it better but I know how scary it is.  Thanks, Joe.

CIRINCIONE:  Thank you, Rachel.

MADDOW:  Coming up: You and I sort of own Citigroup now, whether we want to or not, we sort of own it  Our little Citigroup which we own is now hosting conference calls for anti-union activists to envy against making it easier to join a union in America.  We own them and they‘re hosting union-busting phone calls.  Yes, stay tuned for that.

Also, another making off with huge amounts of other people‘s money news, Bernard Madoff went to jail today.  He says he did it and he says he feels shame.  Who allowed him to do it and do they feel shame?

(COMMERCIAL BREAK)

MADDOW:  And now, a moment of happy civic feelings brought to you by the Constitution of the great state of South Carolina.  As you heard, South Carolina‘s Republican governor, Mack Sanford, has decided to turn down $700 million in federal funds for his state because he wanted to use those funds to pay down the state‘s debt instead of what the federal government meant those dollars for.

South Carolina has the second highest unemployment rate in the country: 10.4 percent.  Those $700 million from the federal government—they were meant to keep that number from getting worse; to prevent the state from having to layoff teachers as its education budget dropped 15 percent.  And that money was supposed to be otherwise directed by the governor to spend some money in the state‘s economy which desperately needs some cash flow.

Governor Mark Sanford said he wanted to pay down the debt or he did not want that money at all.  After all, Mark Sanford can‘t run again in South Carolina.  He‘s up against term limits.  So, this makes a great running for president bumper sticker, “I turned down the money” and darn the consequences for South Carolina—demagoguing 2012.

Today, legislation appears to have trumped Mr. Sanford‘s politics as a Republican state legislator introduced a bill to bypass the governor, to allow the state to use the stimulus funds as they were intended—for stimulus.  Oh, checks and balances, I think I love you most of all.

(COMMERCIAL BREAK)

MADDOW:  Banking, the finance industry, always seemed like relatively high-skilled work to me.  I mean, something has got to justify those huge salaries, right?  But if you think about the last six months or so in banking, it doesn‘t seem like that hard a job anymore.  In fact, it‘s starting to seem like kind of the best job ever.

Think about it, in the last six or eight months, first they agreed their entire business into the ground.  As penance, they took retention awards, bonuses as reward for basically sinking the world economy.  Then, because they‘d done such crackerjack jobs, the banks got ba-freakin‘ zillions of government dollars to save them.

And now—now, they‘re doing exactly what they want with that money, which apparently includes hosting telephone rallies against President Obama‘s favored policies, mainly, the Employee Free Choice Act.  Our banks -- literally, our banks, yours and mine, we own them, they‘re ginning up the opposition to making it easier for people to join unions in this country.

Sam Stein at “Huffington Post” reports that Citigroup, which received three separate infusions of federal bailout money—yesterday, hosted a private conference call about the union bill.  A Citi analyst moderated the call.  And she and the guests on the call railed against the legislation.  Citi says, officially, that they have no position on EFCA.  They just, you know, hosted the call.

In October, Bank of America, B of A, now known as the “Bank made of America‘s taxpayer money,” celebrated its $25 billion bailout by hosting its own conference call with business leaders against EFCA.  You remember Bernie Marcus, the co-founder of Home Depot on that call?

(BEGIN AUDIO CLIP)

BERNIE MARCUS, HOME DEPOT CO-FOUNDER:  Hopefully, calls like this will stir up the pot.  This is the demise of a civilization.  This is how a civilization disappears.

If a retailer has not gotten involved with this, if he has not spent money on this election, if has not sent money to Norm Coleman and all these other guys, should be shot, should be thrown out of their God (BLEEP) jobs.

As a shareholder, if I knew the CEO of the company wasn‘t doing anything on this, on something that was going to have a dramatic effect on my business, I‘d sue the son a (BLEEP).

(END AUDIO CLIP)

MADDOW:  Charmed, I‘m sure.  That was back in October.

That Bank of America call, also the Citi call yesterday, they were paid for by you and me.

Joining us now, he who must be obeyed, Sam Stein, White House correspondent for “Huffington Post.”

Sam, it‘s nice of you to come back on the show.  Thank you for letting me teased you.

SAM STEIN, HUFFINGTON POST:  Thank you, Rachel.  Thanks.

(LAUGHTER)

MADDOW:  Citigroup co-hosting a private conference call about the Employee Free Choice Act.  Citi claims they have taken, quote, “no position on the bill.”  So, I got to ask you, did they also host speakers on that call who were in favor of the legislation as well?

STEIN:  No, they didn‘t.  Now, I just got word and I haven‘t confirmed it that they are going to actually host a conference call with union officials next week as a sort of repentance for what happened yesterday.  So, they are taking steps to rectify the measure.

That said, they weren‘t planning on doing it up until about, I don‘t know, about a couple of hours ago.  So, they weren‘t planning on getting both sides of the coin represented to the retailers that they‘re providing analysis to.

MADDOW:  You—this was your scoop on Citigroup today.  It was also your scoop on Bank of America doing the same thing back in October, also reported by you on “Huffington Post.”  After you exposed Bank of America for doing this - did they ever follow-up?  Have they kept doing this?

STEIN:  Yes.  There was a report today on Dow Jones that Bank of America hosted an Employee Free Choice Act call, ostensibly, to analyze the effects of the legislation on the business community.  But, what you see are bailout recipients not shying away from a legislative battle that critics say they shouldn‘t even be partaking in.

MADDOW:  Well, Sam, let me ask you about another complication here with Citigroup, because on Tuesday .

STEIN:  Sure.

MADDOW:  . of this week, Citigroup controversially downgraded Wal-Mart‘s rating.  They said that it was over fears that the Employee Free Choice Act might pass.

STEIN:  Yes.

MADDOW:  Is there any connection to the conference call that they held the next day demonizing the Employee Free Choice Act?

STEIN:  Well, this is where the rubber sort of hits the road.  The downgrading of the rating combine with the hosting of the call sort of creates the impression that this is such a hot topic for the business community that Congress probably shouldn‘t touch it.  So, it catapults one and helps the other.

So, while Citi says, well, we have no horse in this fight or horse in this race, sorry, their actions combine together create this aura around the Employee Free Choice Act that surely are designed to influence the way Congress proceeds with the legislation.  Now, mind you, they did not upgrade the rating of unionized companies like Safeway, which, by their own analysis, would likely benefit from the Employee Free Choice Act.  So, it was a one-way street with them.

MADDOW:  Is it also true that the Citigroup analyst who actually made the call on downgrading the stock on Tuesday was the same analyst who moderated the anti-union call on Wednesday?

STEIN:  Yes.

MADDOW:  Same person?

STEIN:  Yes, that‘s right.  That is correct.  It‘s the same person. 

Her name is Deborah Weinswig.

MADDOW:  Has Citigroup responded to the inference here that their stock—their ratings division is not impartial?  That they‘re actually using their ratings division for political purposes?  Have they responded to that?

STEIN:  Well, after the story was published, we got a second comment from Citigroup saying that their ratings division is solely independent from the bank, and that the bank has, again, not taken—has not taken a stance on the Employee Free Choice Act.

But you have to remember—Citigroup spent over $5 million lobbying in 2008 and is part of the group called the Financial Services Roundtable which has lobbied in the past year on the Employee Free Choice Act.  So, claims of impartiality are suspect.

MADDOW:  Is there any restriction, Sam, on banks that are on the

public dole effectively using—effectively using our own resources to

lobby like this, to insert themselves into the political process?  Is this

is this more than just unseemly?

STEIN:  Well, there are no restrictions that I know of, although there

are members of Congress after we first reported on the Bank of America call

specifically Congressman Keith Ellison, raised this issue when the banking CEOs came into town to testify before Congress.  He says, well, we are paying you billions upon billions of dollars, why would you then turnaround and use that money either for forums or to lobby the government on legislation that is, in essence, designed to help working Americans?  It doesn‘t make any sense.

So, there is bubbling outrage.  I don‘t know if there‘s any legislative vehicles at this moment that are designed to curbing the influence peddling.

MADDOW:  That might be an idea.

STEIN:  It could be.

(LAUGHTER)

MADDOW:  Sam Stein, White House correspondent for “Huffington Post”—great reporting on this, Sam.  Thanks for joining us.

STEIN:  Thanks, Rachel.

MADDOW:  Coming up next: You know how there are stories in the news all the time about drones—drone strikes, these unmanned aerial vehicles usually firing missiles into Pakistan?  You know how it‘s always our drones that are doing the firing?  Well, now, we‘ve got reports of American forces doing the firing.  But you know what they are firing at?  They‘re firing at another country‘s drone.

Drone wars part one?  Stay tuned.

(COMMERCIAL BREAK)

MADDOW:  Coming up: We here at THE RACHEL MADDOW SHOW get all fake CSI on the Bernie Madoff story.  How did he pull it off?  And now that he‘s in the crowbar hotel at last, can we work on the folks who let him get away with it all this time?  That is coming up.

But, first, it‘s time for a couple of holy mackerel stories in today‘s news.  The FBI has raided the offices of the District of Columbia‘s chief technology officer.  Why do you care?

Well, the man who headed that office as recently as a week ago is now in the Obama administration as the country‘s chief information officer.  His name is Vivek Kundra and he is responsible for overseeing the government‘s computer systems. 

Comfortingly, according to wire reports and other sources, Mr.  Kundra is not the target of today‘s raids.  In fact, one source in the administration told “Wired Magazine,” quote, “Kundra will be fine.  His aide will not.” 

Ouch.  The aide in question is Yusuf Acar.  He was arrested along with the CEO of a business consulting firm.  Both men are apparently suspects in a federal bribery scheme. 

Now, even though the current Obama official and former D.C.  technology office guy, Vivek Kundra, is not being targeted, a senior White House official tells NBC News that Kundra taken leave from his new position until we know more about the FBI‘s investigation.  Our eyes and everyone else‘s are staying peeled on this one. 

Also today, U.S. Military sources in Baghdad tell the “Danger Room” blog - this is an all-wired magazine segment today.  They tell “Danger Room” that an American fighter jet shot down an Iranian drone flying over Iraq. 

OK.  So there are many scary things here.  Number one, Iran has drones?  Did you know that?  I did not know that.  I realize some people knew these things.  I was not among them.  Drones are also known as unmanned aerial vehicles.  They are plane-like aircraft that the United States has been relying on more and more to frequently drop bombs in Pakistan. 

They can also be used for surveillance and for cargo carrying.  They can be preprogrammed with a drone flight pattern or they can be controlled live from a remote location. 

So if U.S. forces really did shoot down an Iranian drone in Iraq, who was controlling it?  I mean, it could be Iranians controlling the Iranian drone or Iran could have sold the drone to someone else.

They are apparently on record doing that.  Iran selling drones to Hezbollah in Lebanon has caused much concern in Israel.  When “Wired Magazine‘s” Noah Shachtman reached out to U.S. authorities for a comment on this today, he was told, quote, “We‘ve got nothing for you, Noah.”

What about me?  Do you have anything for me?  Because I now have many, many, many questions about this.

(COMMERCIAL BREAK)

MADDOW:  “I knew what I was doing was wrong.  Indeed, criminal,” so said arch-white collar criminal Bernie Madoff today inside a New York City courthouse.  Mr. Madoff then became Prisoner No. 617-27-054.  He spent the rest of the day in custody which is where he will likely be sentenced to stay for 150 years.  Couldn‘t have happened to a more worthy candidate.

Mr. Madoff pled guilty to all 11 charges against him.  No plea bargain.  No trial.  He just pled guilty.  On the one hand, it‘s emotionally satisfying.  You know, you were made to make license plates, pal. 

On the other hand, could he really have done this alone with this much money for this long?  And speaking of all that money, where is all that money?  This is a scheme that involved fake stock trades.  How do you fake stock trades?  How do you fake tens of billions of dollars worth of stock trades.

Oh, yes.  And also, in a country of laws and government agencies where ordinary innocent people have their tax returns audited and unpaid parking tickets can get you arrested, how did Bernie Madoff get away with it?  Because he did get away with it. 

Madoff confessed to his sons.  They turned him in.  He was never caught.  Madoff joins Sir Allen Stanford and Enron‘s Ken Lay on the Mt.  Rushmore of recent white collars superrich, big-time conmen. 

And while Madoff‘s scheme was ornate and went on a for a long time, it was essentially nothing more than three-card Monty on a gilded sidewalk.  Where were the cops to come in and bust up the game? 

Con artists are as old as our nation itself.  Back in the 1800s, there was a conman named Joseph “Yellow Kid” Weil.  His shtick was that he would convince people he was a chemist who had discovered a way to copy dollar bills. 

Hoping to double their fortunes, people would hand over their dollar bills and then other conmen dressed as cops would run in.  And yes, you can figure out who ended up with all the money. 

Conmen have been around forever which is why we are supposed to have Elliott Ness types to protect us from them.  And we don‘t.  We have the Securities and Exchange Commission.  After Bernie Madoff was finally arrested, the SEC launched two investigations, one into Madoff‘s scheme itself.  The other was an internal investigation into how they totally missed it for decades. 

To mix convenient metaphors, we apparently put the keystone cops in charge of police in the wild, wild west.  This is not to disparage people who choose to do public service by working at the SEC.  This is not disparage the people take this on as the way they are going to serve their country.  My hat‘s off to them. 

This is to say our country seems to prefer that the SEC offers lax oversight.  Our rules regarding Wall Street are maybe a little too close to assuming that no one who spends his or her life in the singular pursuit of money would ever be criminally inclined. 

Why?  Maybe because of a misguided ideological commitment to the idea - the ideal even of deregulation.  Go ahead, take the bumpers off the bumper cars.  You‘ll go faster. 

It is true.  Bumper cars will go faster if you take those pesky bumpers off.  It can be really fun to fly bumper free until you inevitably crash.  So who was supposed to be making sure that Bernie Madoff didn‘t happen, and why didn‘t they? 

Joining us now is Dave Weidner.  He‘s a columnist for “MarketWatch.com.”  Mr. Weidner, thanks for joining us tonight. 

DAVE WEIDNER, COLUMNIST, “MARKETWATCH.COM”:  Hey, thanks, Rachel. 

MADDOW:  In terms of the Madoff case specifically, the SEC has blamed its ineffectiveness on a lack of resources.  Do you think that is true? 

WEIDNER:  Well, I think on the face of it, that is patently not true.  I mean, what happened during - after the Internet bubble and the Enron and the Worldcoms blew up on the corporate stage, the SEC got more resources from Congress and from the administration than it ever had in its history. 

And so really, going into the last four or five years, they were really armed and prepared better than any SEC had been in history.  So the idea that somehow the resources were the problem is really - it‘s wrong. 

MADDOW:  What is the problem? 

WEIDNER:  Well, the problem is ineptitude.  And you know, you don‘t have to take my word for it.  You can take the word of the whistleblower, Harry Markopolos, who was pointing his finger, ringing the bell, blowing the whistle about Madoff for the last decade.

And he was taking his complaints and his evidence to the Securities and Exchange Commission and nothing happened. 

MADDOW:  It is it possible to have good policing essentially?  I think of this as policing.  I think of this as stopping crime. 

WEIDNER:  It is. 

MADDOW:  Is it possible to have good policing of this sector of our country and our economy?  And we have just - we‘ve chosen not to or is it something that we‘ve now got institutional incompetence that we can‘t get around even if we want to? 

WEIDNER:  Well, it is difficult to say where the problem began.  You know, in the Madoff case, it looks like pure ineptitude or an unwillingness of the commission to pursue Mr. Madoff.  Mr. Madoff had a tremendous reputation on Wall Street - a clean reputation built over a couple of decades before this scheme started. 

So if you are talking specifically about this case, I think the SEC - we just have to sort of take it on the face that they dropped the ball. 

MADDOW:  Unwillingness is a much worse - is a worse charge than ineptitude.  I can be frustrated that you are stupid, but I can be mad at you that you are evil. 

WEIDNER:  Agree. 

MADDOW:  And so I guess I‘m trying to figure out stupid versus evil here.  Because if it is stupid, you just replace people and then you say, OK. President Obama‘s pick to take over the SEC, Mary Schapiro - presumably, she is more ept(sic) - she‘s less inept she‘s going to be able to pull this off. 

If it is unwillingness, then I start to ask questions about whether or not the SEC should be torn down and something else should be put up in its place. 

WEIDNER:  Well, I think that the answer, like it or not, whether or

not it will solve the problem is - well, Washington is going towards

breaking down the regulatory system.  I think, at this point, the populace

so many Americans are invested in the stock market, have lost so much of their wealth, are really afraid that they may be invested with the Bernie

Madoff -

MADDOW:  Yes. 

WEIDNER:  I think right now, the general sentiment is that we need to tear down the SEC and rebuild it from the ground up.  I don‘t know if Mary Shapiro is the right person to do that.  She is a career bureaucrat who really does not - has a mixed regulatory record.  But I think that the forces around her are at least going to force her to look in that direction. 

MADDOW:  I‘m worried structurally, as long as we‘ve got the same system that we‘ve got now. 

WEIDNER:  Yes.

MADDOW:  That we don‘t just, you know - if we go back to the car metaphor, we don‘t just put sort of a speed regulator on what people are doing that we are always going to end up in the circumstance where the cops are the “C” students and the criminals are the “A” students in this field.  Because the incentives are always going to drive that direction. 

You are never going to make $15 billion being a government regulator.  But you might make that being the guy who gets around government regulators.  And those incentives will always be there driving the people with the most ambition toward the places where it least serves the public interest. 

WEIDNER:  Well, I think the scary thing is that the “C” student probably could have caught Bernie Madoff in this case.  You know, he lied his way through standard regulatory checks.  He falsified documents and - all right, maybe you can give the SEC a pass on that. 

I don‘t know as a taxpayer that the IRS would ever be tricked by anything I could do, you know. 

MADDOW:  Yes.

WEIDNER:  But the problem was that you had a whistleblower with mountains of evidence coming to the commission for a decade and they still didn‘t act.  And I think that, you know, it shows there are serious problems in the system. 

MADDOW:  David Weidner, columnist at “MarketWatch.com,” thank you for your clarity on this.  It‘s good to talk to you.  Thanks.

WEIDNER:  Thank you.

MADDOW:  Coming up on “COUNTDOWN,” Dick Cheney had his own secret assassination squad?  Yes.  Keith looks at an investigative journalist Sy Hersh‘s new bombshell claim. 

Coming up on this show, are conservative blue dog Democrats threatening to oppose president Obama‘s recovery plan?  I will attempt to housebreak them.  Next.

(COMMERCIAL BREAK)

MADDOW:  Republican Senator Judd Gregg of New Hampshire almost chose inclusion in the Obama administration as commerce secretary, remember that?  Before he instead opted for political exile as Republican Senator Judd Gregg of New Hampshire.  As senator, he appears to be hell-bent on embracing that decision. 

Today, Sen. Gregg wrote an op ed in “The Washington Times” about the president‘s budget that might as well have been written in all caps with red sirens hanging in the margins, “President Obama is Republicans‘ worst tax-and-spend liberal nightmare come true.  Why, we shouldn‘t even call it a budget.”  Mr. Gregg wrote, quote, “It should be called a blueprint for the France-ification of America. 

France-ification?  No, seriously?  France-ification - the budget is going to give us delicious cheese and bullet trains and fashion sense?  Sometimes the best cabinet appointments are the ones that didn‘t happen. 

(COMMERCIAL BREAK)

MADDOW:  Here‘s what power looks like in Washington, D.C. right now.  The executive branch, the White House, controlled, of course, by a new popular Democratic president.  The House of Representatives controlled also by the Democrats.  The other house of Congress, the United States Senate, controlled, yes, by the Democrats. 

And just for context, you know how everyone talks about what a big deal Newt Gingrich was when he was speaker of the House, how he wielded his massive Republican majority of the House to thwart Bill Clinton‘s agenda, to effectively neuter the new president in the middle of his first term? 

Story to get so phallic in that imagery.  But remember that is totally the way everybody talked about it back in 1995 and since.  Anyway, Gingrich‘s massive 1995 majority, the overwhelming force that changed the course of Bill Clinton‘s presidency was 25 seats.  Wow.  Big, right?  There were 25 more Republicans than Democrats in the House of Representatives.  No wonder Clinton had such a hard time with his first term agenda. 

Want to know how big Nancy Pelosi‘s majority is this year?  Oh, yes - 79.  The Democratic majority in Congress is massive.  Take that, manly metaphor mayhem.  In the Senate, things are a little different. 

Since the Republicans have been in the minority there these last few terms, everyone has decided to go along quietly with the Republicans‘ insistence that these previously rarely-used rules that give the minority some power in the Senate, those rules should be used all the time. 

And so now, it doesn‘t take a majority vote to pass something in the Senate.  It doesn‘t take 50 votes.  It takes 60 votes - a super majority, inexplicably.  In any case, the bounds of power in Washington now is that Republicans in the House are a very, very, very small minority in a House in which the minority party has no power other than that which they can conjure from cable news. 

The Democrats in the Senate have as big a majority as they‘ve got in the house.  And even with this freakish rule about needing a supermajority, needing 60 votes to pass anything.  They have almost got even that. 

If Al Franken gets seated from Minnesota, they‘ll have 59 of those 60 votes.  All of this means that if the Democrats decided to work together, to act strategically as a party that has a vision for they want the country to go, if national elected officials of the Democratic Party decided that they wanted to, they could pass the president‘s agenda.  They could stand together and pass a Democratic policy agenda to lead the country. 

They would need to earn precisely one vote on major bills in order to do that.  Or they can even get rid of the dumb it takes 60 votes to pass anything rule and then they wouldn‘t need any Republican votes at all. 

If they wanted to, Democrats could use the power voters just gave them in Washington and they could lead the country bypassing a Democratic policy agenda. 

Guess what?  It turns out they are not interested in that.  The newspaper “Role Call” reports, quote, “Led by Senators Evan Bayh, Tom Carper and Blanche Lincoln, a group of 15 to 20 Democratic moderates plans to formally announce next week that it is aligning a loose coalition focused on deficit reduction and fiscal responsibility.” 

In other words, conservative Democrats in the Senate are forming an internal dissenters‘ group to push the government to restrain spending, cut down that deficit, tighten its belt.  Does that sound familiar? 

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), HOUSE MINORITY LEADER:  I think if you look around the country, our economy is struggling.  American families are tightening their belt but they don‘t see government tightening its belt.  I think that we can get through this year and lead by example and show the American people that the government can go on a diet as well.  

(END VIDEO CLIP)

MADDOW:  The government should go on a diet.  The government should tighten its belt just like we did when we made the Great Depression way worse.  That spokesman for the utter misunderstanding of basic economics is the top Republican in the House, John Boehner. 

What are you thinking as a Democratic senator right now, if you decide with this president, in these times, with these Democratic majorities?  Now is the time to form a group of Democratic dissenters who instead of following the president, will follow the leadership of the House Republicans who happen to be the political laughing-stock of the country. 

What are these Democratic senators thinking?  This is the time, really, to form a “tighten our belt, stop spending” Democratic caucus in the Senate?  This is the time when the government desperately needs to spend to stave off a depression? 

This is the time now in 2009 and not, say, when George W. Bush turned hundreds of billions of surplus into a trillion dollar deficit and spent $1 trillion on the war on Iraq and enlarged government more than any time since World War II? 

You sat on your hands through all of that, but now, you‘re deciding to dissent, now that the Democrats are in the position to fix stuff?  Now, you‘re dissenting?  Now, you‘re finding your bravery? 

(COMMERCIAL BREAK)

MADDOW:  I like that very much.

KENT JONES, POP CULTURIST:  Isn‘t that fancy? 

MADDOW:  Isn‘t that you with some sort of giant plushie at the beginning? 

JONES:  That‘s me with Super Mario.

MADDOW:  Oh, very good.

JONES:  We‘ve been friends for years. 

MADDOW:  OK.  What have you got?

JONES:  Tonight - remember last month when Kellogs decided to punish Michael Phelps for those bong hit pictures and yanked their endorsement deal? 

Well, here‘s kind of a nice follow-up.  Kellogs has recently donated thousands of boxes of cornflakes and frosted flakes with Phelps‘ big toothy picture on them to the San Francisco food bank. 

MADDOW:  Oh, wow.

JONES:  The director of the food bank says he doesn‘t know exactly why the cereal is donated now, but he‘s perfectly glad to have them. 

But the terrific gesture - but I‘m not sure the combination of Michael Phelps, the cartoon tiger and sugary cereal is going to make anyone forget the pot take.

MADDOW:  It‘s a very good line.

JONES:  Dots connect.

MADDOW:  Yes.  Luckily, he was not a Funion spokesman as well.

JONES:  No Funions.  Next up, strippers.  With budget deficits threatening to cut programs, Assemblyman Felix Ortiz from the Bronx has a solution.  He‘s proposing a $10 tax for patrons of New York strip clubs. 

Here‘s the good news.  For your $10, you‘ll get a watered down rum and diet coke with lots of ice and all the Prince songs you can handle.  

MADDOW:  Aww.  That‘s very sad.  Think of the poor strip clubs. 

JONES:  Indeed.

MADDOW:  What are you supposed to say about that?  $10.  Oh, well. 

OK.

JONES:  Seems a little steep. 

MADDOW:  I‘m not so familiar with the economics of the strip industry, but I‘m sure I will hear about it now.  

JONES:  I‘ve been reading.  

MADDOW:  Thank you.

JONES:  Finally, New Zealander Matt Wilson hosted something called “The Ultimate Fishing Show” where he does things like jumping out of a helicopter on to a marlin.  Oh! 

MADDOW:  What?

JONES:  I love you, man! 

MADDOW:  Oh, my god.

JONES:  Swim away.  Swim away.  Don‘t let the kiwi eat me.  Oh no! 

Look at that, oh!  There he is again.  Oh! 

MADDOW:  Does he stay with it? 

JONES:  Yes.  There he is, having a little dance with the marlin.  

MADDOW:  But then he lets it go. 

JONES:  He lets it go.  They are friends.  

MADDOW:  It‘s captain release day.  

JONES:  It‘s captain release day.  Let‘s dance, marlin.

MADDOW:  Hug and release. 

JONES:  Got a two-foot sword on the edge of your nose.  But let‘s do this anyway.  Come on.

MADDOW:  All right, Kent.  I have a cocktail moment for you. 

JONES:  Very good.

MADDOW:  Australia‘s environment minister is doing something very cool.  He is actually playing a concert to raise funds for people who are the victims of the horrible wildfires in Australia.  Certainly neat, a minister in the government playing a concert. 

JONES:  Yes.

MADDOW:  Turns out he‘s the guy from midnight oil. 

JONES:  Oh, yes.

MADDOW:  Yes.  Remember, beds are burning - big bald guy?

JONES:  Early MTV - that‘s my era.  

MADDOW:  This was the guy.  He broke up the band in 2002 to pursue a career in politics.  He‘s now the Labor Party‘s environment minister.

JONES:  Fantastic.  I was hoping that for him.  

MADDOW:  I know.  Good for him.  Thank you, Kent.  Thank you for watching tonight.  “COUNTDOWN” with Keith Olbermann” starts right now.  Have a great night. 

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

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