updated 3/23/2009 9:40:08 AM ET 2009-03-23T13:40:08

Guest: Gary Peters, Rick Newman, Dan Gross, Daniel Bowman Simon, John Yang

(BEGIN VIDEOTAPE)

DAVID SHUSTER, HOST (voice-over):  Tonight, the president rolls out a new plan to keep taxpayer funds from being wasted.

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES:  Decisions about how we‘re covering money that will be spent will be based on the merits.  They will not be made as a way of doing favors for lobbyists.

SHUSTER:  But the public outrage continues over the bank bailouts.  Last fall, Merrill Lynch  awarded bonuses totaling more than $3 billion.  New York‘s attorney general heats up a criminal investigation. 

Plus, on the defensive over Minnesota earmarks. 

REP. MICHELE BACHMANN ®, MINNESOTA:  ... $70 million.  And so mine is very, very small  on that level.

SHUSTER:  But that level is wrong.  And Congresswoman Bachmann lands again in “Hypocrisy Watch.” 

Later, Michelle Obama and some area schoolchildren break ground on a new White House vegetable garden. 

MICHELLE OBAMA, FIRST LADY:  And we‘re going to have some lettuces and we‘re going to have some berries.  We‘re going to also have a beehive. 

SHUSTER:  And the things I thought you should know—highlights from Leno... 

OBAMA:  The Secret Service says, “No, sir.  It‘s 750 yards.”

SHUSTER:  ... and Twitter time. 

All tonight on 1600 PENNSYLVANIA AVENUE.

OBAMA:  The more I can break out of the bubble, the better off I am. 

(END VIDEOTAPE)

SHUSTER:  Mopping up the AIG mess, day 60 of the Obama administration. 

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

A day after the House voted to try to get back most of the $165 million in bonuses paid to AIG executives, the measure hit a delay in the U.S.  Senate.  We‘ll have more on that in a moment. 

But first, the Obama administration remains under fire over AIG after it was revealed that a provision in the stimulus bill allowed for the bonuses to be paid.  And Republicans are ratcheting up the attacks on Treasury Secretary Timothy Geithner. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  Geithner has an incestuous relationship with Wall Street. 

REP. JOHN BOEHNER ®, MINORITY LEADER:  He could have made clear that no bonuses were going to be paid. 

UNIDENTIFIED MALE:  And now we have the spectacle of Senator Dodd pointing the finger at Secretary Geithner and Secretary Geithner pointing the finger at Senator Dodd. 

ALI VELSHI, CNN:  As far as you can remember, though, you did not know about this before March 10th

TIMOTHY GEITHNER, TREASURY SECRETARY:  On Tuesday, I was informed about the full scale and scope of these specific bonuses problems.  And again, as soon as I did—but, you know, it‘ my responsibility.  I was in a position where I didn‘t know about those sooner.  I take full responsibility for that. 

(END VIDEO CLIP)

SHUSTER:  Secretary Geithner‘s remarks echo those of President Obama, who said he, too, takes full responsibility.  Clearly, the president is trying to take some of the flak for Geithner.  And last night, on “The Tonight Show,” President Obama insisted he is standing by the treasury secretary. 

(BEGIN VIDEO CLIP)

OBAMA:  This guy has not just a banking crisis, he‘s got the worst recession since the Great Depression.  And he‘s doing it with grace and good humor, and he understands that he‘s on the hot seat. 

VELSHI:  What about the calls for you to resign? 

GEITHNER:  You know, again, I think this just comes with the job. 

(END VIDEO CLIP)

SHUSTER:  Today, the Obama White House made it clear they believe the best defense is a good offense.  So the president unveiled a new plan to remove the impact of lobbying on government spending. 

Meanwhile, back to the controversy over AIG, Federal Reserve Chairman Ben Bernanke issued his own warning about hefty Wall Street paychecks, and the president called out the CEO of AIG. 

(BEGIN VIDEO CLIP)

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN:  Supervisors must play close attention to compensation practices that can create mismatches between the rewards and the risks by institutions or their managers.  Poorly designed compensation policies can create perverse incentives. 

EDWARD LIDDY, AIG CEO:  My fear is the damage is done, that we will get the bulk of that money back.  They will return it, but they will return it with their resignations. 

JAY LENO, “THE TONIGHT SHOW”:  I had to laugh the other day when the CEO of AIG said, OK, I‘ve asked them to give half the bonuses back.  Now, if you rob a bank, and you go into court, and you go, “Your Honor, I‘m going to give you half the money back”—and they seem stunned that we‘re not jumping at this wonderful offer. 

(END VIDEO CLIP)

SHUSTER:  We begin with the effort to tax back the AIG bonuses. 

And joining us now is Congressman Gary Peters, Democrat from Michigan.

And Congressman, what‘s your understanding about the delay in the U.S.

Senate? 

REP. GARY PETERS (D), MICHIGAN:  Well, I know the Senate is looking at the package, and I‘m sure they‘re going to have a different version of that.  And they‘ll pass something, and we‘ll go into the conference committee and make some changes at that point. 

SHUSTER:  The provision that the House passed yesterday would impose restrictions on banks getting over $5 billion in bailout money.  A lot of the banks say that will cause them to get out of the TARP program.  And without the government funds, they will have less capital to help balance their books, their balance sheets, and less credit that they can extend. 

Isn‘t that a problem? 

PETERS:  Well, if these banks are in a position where they can be giving backs TARP money, which is basically taxpayer money, I would encourage them to do that.  In fact, that is the purpose of this bill, is saying prior to any bonuses being paid to these managers out of taxpayer money, they need to pay the taxpayers back first.  And if the banks are in a position to pay that back to the taxpayers, I encourage it.

We‘re hoping that that money does come back.  And if that‘s what‘s holding banks back, is that they‘re concerned about their outsized bonuses, then give the taxpayers money back before they start paying any bonuses to themselves.  Personally, I would think that would be not a bad thing. 

SHUSTER:  The argument from several Republicans in terms of what‘s holding them back from supporting this, a lot of them suggest that this is just simply patently unconstitutional, that it amounts to a bill of attainder or in terms of targeted in one specific organization. 

Your view on that point? 

PETERS:  Well, it is not just my opinion.  Folks like Laurence Tribe, as you know, one of the leading constitutional scholars in the country, has said this is not a bill of attainder, this is a legitimate public purpose, it‘s got a fiscal purpose in that it is dealing with protecting taxpayer money because there is substantial taxpayer investments in these companies.

Plus, it is not just a retroactive punishment.  This is a proactive policy. 

It‘s saying, from this point forward, anybody who is taking out bonuses in a company while there is a substantial federal government investment, a taxpayer investment of $5 billion or more, you can get a bonus, but it will be taxed at a 90 percent rate above $250,000 in total income.  So it is designed to make sure that we are recovering taxpayer money and that it‘s not being paid out in bonuses to executives, but the taxpayer money is indeed just to shore up the finances of an institution that needs that money to get through this crisis. 

SHUSTER:  Finally, as far as the situation at AIG, CEO Edward Liddy made the case this week that if AIG workers had to give back their bonuses, they would have no incentive to stay and wind down their business. 

If there is financial products—if those products—if there‘s an exodus over that, aren‘t the taxpayers left holding the bag for the $1.6 trillion business? 

PETERS:  Well, he talks about this being a retention bonus, but from information that‘s come out from the New York attorney general, apparently several of these folks have already left.  They‘ve already left, and yet they‘re going to be getting these retention bonuses.  So there have been people leaving. 

But I think it is really something that AIG says he needs the talent of these individuals, and yet these are the very individuals that brought AIG to its knees and contributed to this financial mess.  If these are the talent that AIG wants to keep, they do have some serious problems. 

They need to get new talent in there that understand this business and can help AIG, as opposed to the very individuals that brought them to their knees.  These folks, if they can fix this problem, they should stay there, because they made the mess.  But I would argue we need to have folks who can do a much better job and can be rewarded for success, as opposed to these individuals who are getting rewarded for not only failure, but spectacular failure. 

SHUSTER:  Congressman Gary Peters, Democrat from Michigan, one of the first lawmakers to come up with the idea of using taxes to try to get the money back to the Treasury.

And Congressman, thanks for joining us again tonight.  We appreciate it.

How worried is the White House about the bonus upwar and the increased criticism of Treasury Secretary Tim Geithner?  Robert Gibbs was asked about it today. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  A pretty tough week for the president this week.  He seemed to be losing the message war almost every day.  Every day, he had some economic plan out there, and every day it was AIG or Geithner or the comments on Leno. 

Are you worried this may be kind of a watershed week when he‘s losing control of the message? 

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY:  No. 

(END VIDEO CLIP)

SHUSTER:  Criticism there, but there is a clear discrepancy in Secretary Geithner‘s timeline.  He said last night he didn‘t know about the AIG bonuses until March the 10th, but he was asked about those same bonuses when he testified to Congress on March the 3rd

For more, let‘s bring in NBC News White House Correspondent John Yang. 

He joins us live from 1600. 

And John, how concerned is the White House about this discrepancy, or do they think that Geithner simply taking responsibility, that that‘s the end of it? 

JOHN YANG, NBC NEWS WHITE HOUSE CORRESPONDENT:  Well, they hope that‘s the end of it.  That‘s the point they kept—Robert Gibbs kept coming back to in this briefing today, that the secretary was taking responsibility. 

But David, you‘ve got to look at that statement very closely.  He doesn‘t say that March 10th was the first time he was aware of the bonuses.  He says it was the first time he was aware of the full scope of these particular bonuses. 

In other words, it sounds like what he‘s trying to say is that yes, he knew there were bonuses coming down the pike, but he didn‘t know they were this big.  It is a very carefully parsed sentence. 

SHUSTER:  As far as the bonus tax bill—and again, it‘s now in front of the U.S. Senate, there does seem to be some problems there.  But assuming that it gets through Congress, does the president want this to come to his desk?  Is it something he would plan to sign? 

YANG:  Well, you know, it‘s interesting.  He made a statement that was a paper statement that came out yesterday after the House voted, and then he talked about it on Jay Leno, on “The Tonight Show.”

He said he understood the frustration that was being expressed by Congress in that vote.  He said he understood the anger of the people that was being reflected.  But he never said if he thought it was a good idea or if he would sign the bill.  He did say on “The Tonight Show” that a better approach would be to make sure that the barn door is shut before the horse gets out. 

Today at the briefing, White House Press Secretary Robert Gibbs said the lawyers are looking at the legislation—that the House passed legislation for precisely the issues you talked to the congressman about.  Number one, is it constitutional?  And number two, is it doing what they want? 

Is it perhaps having some unintended consequences of affecting banks who were healthy banks but took TARP money at the urging of Secretary Hank Paulson under the Bush administration, in the effort of getting more capital, more liquidity into the lending market?  Would it have an adverse effect? 

SHUSTER:  NBC News White House Correspondent John Yang.

John, great reporting, as always.  And thanks so much for being part of the program tonight.  We appreciate it, as always. 

YANG:  Thanks, David. 

SHUSTER:  That bonus tax that we have been talking about would not affect Merrill Lynch employees who received $3.6 billion.  That‘s because the company gave up the bonuses in December, right before Merrill merged with Bank of America. 

New York‘s attorney general has launched a potential criminal investigation into Merrill Lynch.  Up next, we will get the latest. 

Plus, Congresswoman Michele Bachmann keeps trying to clear her name in the controversy over earmarks, but she has landed once again in “Hypocrisy Watch.”

At the half-hour, we will separate fact from fiction over responsibility inside AIG for the bonus mess.  Newsweek‘s Daniel Gross will join us for “Myth Busters.”  It‘s a big one.  And again, that‘s at the half-hour. 

And we‘re taking your questions and video suggestions over Twitter.  Just go to twilter.com/schuster1600, or click on the link at shuster.msnbc.com. 

(COMMERCIAL BREAK)

SHUSTER:  Amidst all of the talk surrounding the AIG bonuses, there‘s another story involving a much bigger pool of money you will want to keep your eyes on.  It‘s the story involving Merrill Lynch and its $36 billion bonus pool.  That‘s “billion” with a “B.” 

Yesterday, New York Attorney General Andrew Cuomo received the names of Merrill employees who collected large bonuses, even as the brokerage lost $15 billion in the fourth quarter alone.  In February, Cuomo described his investigation in a letter to Congressman Barney Frank, saying, “Merrill Lynch‘s decision to secretly and prematurely award $3.6 billion in bonuses, and Bank of America‘s apparent complicity in it races serious and disturbing questions.”  Cuomo said, “Merrill chose to make millionaires out of nearly 700 employees.”

According to Cuomo, the top four bonus recipients at Merrill received a combined $121 million.  The next four executives, $62 million.  And the next six, a total of $66 million. 

Again, just this past Wednesday, a judge ordered Bank of America and Merrill Lynch to turn over the list of bonus recipients.  Yesterday Cuomo received that list. 

So where is Cuomo going to take the investigation now?  And could public shame be part of the punishment he decides to mete out? 

Rick Newman is chief business correspondent with “U.S. News & World Report.”

And Rick, where is Cuomo taking this investigation?  Criminal?  Civil? 

What are the key issues to watch? 

RICK NEWMAN, CHIEF BUSINESS CORRESPONDENT, “U.S. NEWS & WORLD REPORT”: 

Well, we‘re waiting to find out.  He has said in court filings that he is investigating whether those Merrill Lynch bonuses, which, as you pointed out, amount to about 20 times as much money as we‘re talking about with AIG, whether those bonuses constituted fraud. 

He hasn‘t filed a criminal complaint yet.  He‘s investigating.

He‘s called the bonuses imprudent.  He‘s pointed out that shareholders were not aware of those bonuses, that those bonuses happened on an accelerated timetable.  There‘s a thing called fraudulent conveyance, which is basically when you might be setting up some money over here so that creditors over here can‘t get to it. 

I think he‘s investigating whether to do that.  And, of course, he‘s appealing to popular anger, just as the members of Congress were doing with regard to AIG earlier this week. 

SHUSTER:  Rick, do you know if he‘s set up a grand jury investigation yet?  And again, is the key legal issue here that the stockholders at the board were not aware, and therefore it‘s a fraud upon them? 

NEWMAN:  I don‘t know about a grand jury investigation, and we may not know until that actually happens.  But yes, I think that, what were the shareholders aware of at the time?  And what should they have been aware of at the time? 

And especially in light of the fact that Merrill Lynch lost nearly $28 billion last year.  That‘s obviously a huge loss.  And the timing, of course, of all this is very squishy.  The bonuses were determined before Merrill actually knew what its final numbers were going to be for 2008, according to Cuomo‘s filings. 

So he‘s established some of this evidence, and it‘s also possible that he could be just putting some of this evidence on the record, if you will, for possible civil complaints.  We actually saw this happen when Eliot Spitzer, when he was attorney general back in 2003-2004, when he went after some of the Wall Street firms.  He made some settlements, but he put all this information out there that trial lawyers and even class action lawyers were able to use for civil suits. 

SHUSTER:  And Rick, I gather there‘s some chatter that perhaps Attorney General Cuomo, at the end of the day, may decide the go the route of shame.  In other words, simply publicize the names of these people that got these bonus as a way of shaming them in some fashion? 

NEWMAN:  Yes, certainly a possibility.  He could also leak them.  I think we have already seen a few of these names leak. 

And, you know, the New York attorney general is an elected official.  He ran for governor once, he could run for governor again.  Clearly, there‘s a political calculus to this.

And he has also said that in light of what we heard this week about death threats and other security issues involving employees at AIG, that he is going to conduct a security analysis that will be part of his decision over whether to release these 200 names at Merrill. 

SHUSTER:  Such an interesting investigation. 

NEWMAN:  It really is.  It‘s almost like a Mafia trial almost. 

SHUSTER:  Absolutely.

Rick, thanks so much for joining us...

NEWMAN:  Sure thing.

SHUSTER:  ... and helping us to follow.  We appreciate it. 

We have an update on a developing story we brought you involving Citigroup.  Last week, we spoke with Congressman Dennis Moore about a letter he sent to Citigroup asking the bank to explain discrepancies that seemed to emerge over Citigroup‘s CEO‘s 2008 compensation and the money that CEO, Vikram Pandit, gave under oath, and the testimony actually that he gave under oath. 

Today, Citigroup told the congressman it never received the lawmaker‘s letter or e-mail.  Furthermore, the company said the testimony of CEO Vikram Pandit was accurate when he testified to receiving a $1 million salary last year and no bonus. 

Regarding stock awards, Citigroup insists Pandit did not receive $10.8 million, as we reported last night.  Citigroup says Pandit received only a small fraction of that, in part due to the decline in the value of Citigroup‘s stock.  Citigroup said Mr. Pandit will only work for $1, will not accept any bonus until the company returns to profitability. 

A clarification on our part.  We made an incorrect reference to the cost of the corporate jet Citigroup had ordered and then canceled.  We meant to say the jet was in the range of $50 million, and according to Citigroup, the jet would have, in fact, cost about $42 million. 

Still ahead, President Obama‘s appearance last night on “The Tonight Show” was entertaining on many levels.  We will bring you some of the most interesting clips. 

But up next, Congresswoman Michele Bachmann insists she is an earmark reformer, especially compared to her Minnesota colleagues.  Bachmann gets it wrong again. 

“Hypocrisy Watch” is next on 1600.

(COMMERCIAL BREAK)

SHUSTER:  It‘s been a few weeks since Congress approved a government spending bill stuffed with pet projects and earmarks, but Republican Congresswoman Michele Bachmann is again trying to portray herself as a reformer. 

And that takes us to tonight‘s “Hypocrisy Watch.”

First, the background.

About 10 days ago, Congresswoman Bachmann denied taking any earmarks. 

(BEGIN VIDEO CLIP)

BACHMANN:  I think it is possible.  I took a pledge in my own district, I have not taken earmarks in the last three years that I have been in Congress because the system is so corrupt. 

(END VIDEO CLIP)

SHUSTER:  As we pointed out last week, Bachmann actually requested seven earmarks in 2008 costing taxpayers a total of $3.7 million.  The projects included $94,000 for a sheriff‘s youth program; $335,000 for equipment; acquisition for Northland Medical Center; and $803,000 for the replacement of small buses in St. Cloud. 

Following our story, Bachmann was interviewed again on another cable channel, tried to put things in perspective, and once again claimed to be a reformer. 

(BEGIN VIDEO CLIP)

BACHMANN:  Well, the average earmark I think for the state of Minnesota, for the members of Congress, is somewhere around $70 million.  And so mine is very, very small on that level. 

(END VIDEO CLIP)

SHUSTER:  The problem is that level is wrong.  According to LegiStorm, in 2008, Minnesota‘s congressional delegation delivered 158 earmarks costing $330 million.  The average earmark for Minnesota‘s members was not $70 million, as Bachmann claimed, but $2.1 million, which is less than the $3.7 million Bachmann earmarked. 

Congresswoman, when you insist that your record be put in perspective, and then you mislead people about the record of your colleagues, that‘s hypocrisy, and it‘s wrong. 

Still ahead, hey kids, eat your organic vegetables.  The Obama family plans to lead by example.  And today, the first lady broke ground on the first White House garden since FDR was in office. 

But up next, it‘s time to bust some myths like the one that nobody in particular deserves blame, for those massive AIG bonuses.  Who‘s really responsible for the bonus blunder? 

The answer next on 1600.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE.  This week, the realization, outrage and legislative action on the 165 million dollars in AIG bonuses ricocheted back and forth between each of the five stages of grief.  One, denial.  Stunned is the word President Obama told Jay Leno last night, coupled with renunciation. 

Two intense anger across the country, and outrage from Congress.  Three, bargaining, as Congress called AIG‘s CEO in and tried to engineer some way to get the money back.  And four depression.  By last night, it sounded like President Obama had reached stage five, acceptance. 

(BEGIN VIDEO CLIP)

OBAMA:  I understand Congress‘s frustrations.  And they‘re responding to, I think, everybody‘s anger.  But I think that the best way to handle this is to make sure that you‘ve closed the door before the horse gets out of the barn. 

(END VIDEO CLIP)

SHUSTER:  As Congressional Democrats and some Republicans try to pull the 165 million dollar horse back into the barn, or tax it to its knees, we‘ll talk to our panel about who took the biggest political hits this week.  Chris Kofinis and Brad Blakeman will join us. 

But first, tonight‘s myth, that, at the end of the day, contracts are contracts and though Congress may tax that money back, ultimately, there‘s no one to hold accountable.  Joining us now to bust that myth is Dan Gross, senior editor at “Newsweek,” author of the book “Dumb Money, How Our Greatest Financial Minds Bankrupted the Nation.”  And that is available in paperback starting next month. 

Dan, welcome, as always.  You said that after Liddy testified to Congress, we got the wrong guy.  Who are the right guys to hold accountable? 

DAN GROSS, “NEWSWEEK”:  There are a bunch of right guys.  David, now we‘re in the sixth stage of grief, which is discussing it on television.  The right guys might be Joseph Cassano (ph).  He headed the AIG financial products unit that caused all these problems.  And he made about 300 million dollars, which is twice the amount of these bonuses.  We haven‘t seen him.  I believe he has a lawyer now who‘s a specialist in white collar crime.  He may well face some serious liability in all this.  But we haven‘t heard from them. 

We didn‘t hear from the last two CEOs, the people who were actually running the company and getting paid tens of millions of dollars, while all this activity was happening.  That would be Martin Sullivan, who was CEO from 2005 to 2008, and, of course, Maurice Hank Greenberg, not to be confused with the baseball slugger.  He is the guy who built AIG into the company it was. 

And then I would also add this superstar board of directors.  AIG was this giant global company, a component of the Dow Jones Industrial Average.  It‘s board of director includes a bunch of heavy weights, William Cohen, who was the secretary of defense during the Clinton administration.  Carla Hills, US trade representative during the first Bush administration.  Martin Felstein, who is the godfather of Reaganomics, very prominent Harvard economist, was on the board for 20 years.  And Richard Holbrooke, who has gone back and worth between diplomacy and investment banking over the years. 

These people all collected millions of dollars in fees and were tasked with over-seeing what was going on. 

SHUSTER:  Dan, Maurice Hank Greenberg did pop-up and made an appearance on CBS.  And I want to play that for you and get your reaction, watch this. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE:  If you were still CEO, would you have paid out the bonuses? 

MAURICE HANK GREENBERG, FMR. CEO OF AIG:  Absolutely not. 

UNIDENTIFIED FEMALE:  When we heard from Edward Liddy on Capitol Hill this week, he seemed to imply that a lot of the mistakes at AIG were made when you were CEO.  Do you accept any responsibility for what‘s happened? 

GREENBERG:  Absolutely not.  It was the greatest company in history. 

(END VIDEO CLIP)

SHUSTER:  Greatest company in history.  Dan, what do you make of that? 

GROSS:  Greenberg is kind of this Shakespearian tragic figure.  He is a self-made guy who built AIG from a small insurance company into a global titan, ran it for decades.  He tried to bring his son into the business.  It didn‘t work out.  Eliot Spitzer, the former attorney general, forced him out in 2005.  This is a guy who was in his late 70s and still kind of had this tyrannical rules over this company. 

So it‘s possible that the ship would have been more tightly run under him.  On the other hand, AIG Financial Products got going under Greenberg, and it did a lot of this business through ‘03, ‘04 and ‘05, when he was still in charge.  They really jumped the shark in ‘06 and ‘07, when they doubled down on a lot of these bad bets, when it was clear the market was going against them. 

SHUSTER:  Finally, Dan, there‘s an e mail that‘s going around.  A lot of people seem to think that the reason the government is helping out AIG is because of this idea that AIG insures Congressional pensions.  Is that a myth or is that the truth? 

GROSS:  David, we could put that one in our myth file, which seems to be growing by the week.  They do not insure Congressional pensions.  They do, however, insure a lot of financial instruments owned by very big banks, including banks that are owned by European governments.  Like German state owned banks had financial relationships with AIG.  They are among the people who are getting bailed out.  So it might be some German citizens, but not members of Congress. 

SHUSTER:  Senior “Newsweek” editor Daniel Gross—any time we have Dan on, we know we‘re going to be able to bust some myths.  Dan, thanks so much.  Have a great weekend. 

GROSS:  You too, David. 

SHUSTER:  Now let‘s bring in our panel.  Again, Chris Kofinis is a Democratic strategist and former communications director to John Edwards.  Brad Blakeman is a Republican strategist and former deputy assistant to President Bush.  Chris, there did seem to be this effort by members of Congress this week to make Edward Liddy, the current CEO of AIG, the fall guy.  Was that a mistake? 

KOFINIS:  Listen, I don‘t think it was a mistake.  He is the CEO of the company, whether he‘s working for a dollar or not.  I think part of what‘s happening here—you saw it in his testimony, this rationalization of these bonuses.  He should have been, I think, first and foremost, aware of the potential blow back, considering the fact that he was put in place to manage a company that basically was bankrupt, and needed bailout money in order to survive. 

So the notion that somehow you‘re going to reward executives that basically put the economy and this company in peril, it just didn‘t make sense.  So I think that he took heat for it is justified. 

SHUSTER:  Speaking of heat, a lot of conservatives, Brad, don‘t like what the House did yesterday.  They feel that this will simply tighten the credit crisis.  What‘s your view and explain, do you agree with that? 

BLAKEMAN:  What do you mean?  What the House did—

SHUSTER:  The House essentially clamping down some restrictions.  Any bank that receives more than five billion dollars is going to face these restrictions.  A lot of banks say, to heck with that.  I‘m not going to participate.  If that means that the credit continues to be frozen, because I have less capital, so be it. 

BLAKEMAN:  Yes, there‘s a couple of things the House did.  One is to—as we have seen, they passed this tax, which I agree is a bill of retainer on those who received those bonuses.  Now you‘re talking about the restrictions that they put in their operations.  I think a lot of these banks should figure out how to downscale and how to figure out ways of not taking government money, if it‘s at all possible, because the government now is swinging the pendulum so far in the other direction that it‘s going to be hard for these companies to do business. 

As the president said on the “Tonight Show,” what Congress should have done was not let the horses out before the doors closed.  Now trillions of horses are out, and they‘re trying to figure out what they did on a bill they wouldn‘t let anybody read before they voted on. 

KOFINIS:  Brad is defending the idea that executives who blew up these companies and put our economy in jeopardy should get the bonuses. 

BLAKEMAN:  I didn‘t say that at all. 

KOFINIS:  This is the problem I have had with this whole dance we have had this week, where Republicans come out and feign outrage at the Democrats, say, how outrageous that these AIG bonuses were paid out.  And then when they have the opportunity to actually vote with the overwhelming majority of Democrats, what did almost the majority of them do?  It was 87 Republicans.  They decided to vote against the very thing that they were supposedly decrying. 

This is the hypocrisy of the process, of the politics.  And instead of making this a distraction, instead of focusing on trying to score political points, the Republicans and Democrats should focus on how do we prevent this from ever happening again.  There is a populist rage out there.  But that rage is going to turn its guns on Republicans who play these games. 

BLAKEMAN:  But you got burned by your own process.  You put this bill forward, which had these bonuses in it.  Now Dodd says, at first, he knew nothing about it.  And then he admitted, oh, yes, Treasury made me do it.  Then you force the bill on the very members who were supposed to vote on it.  And they had no time to read it or digest it. 

(CROSS TALK)

KOFINIS:  Eight years of Bush economic policy—

(CROSS TALK)  

BLAKEMAN:  You guys control the Congress. 

SHUSTER:  Here‘s the argument we get a lot from people, and that is, what is the Republican plan to make sure that this doesn‘t happen again? 

BLAKEMAN:  Here‘s the plan, we need reasonable restrictions. 

KOFINIS:  What‘s that? 

BLAKEMAN:  Reasonable restrictions is what the market can bear in order to operate.  And what we have to do is not tax.  We have to grow businesses.  That‘s the thing that the American people don‘t want. 

KOFINIS:  You have companies that basically didn‘t do their job and are  but we still deserve bonuses. 

BLAKEMAN:  I‘m not talking about the bonuses.  I agree with you. 

KOFINIS:  You don‘t have to do anything to get an enormous amount of bonus. 

BLAKEMAN:  It‘s the method by which you and try to get the bonuses back.  They should be looking at criminal behavior on the part of the Justice Department.  They should also be looking at civil lawsuits. 

KOFINIS:  These are executives—some of these executives, clearly, at some of these financial institutions who are not living in reality.  And the dangerous game they are playing is this populist rage is going to grow and grow and grow.  And instead of being responsible—

BLAKEMAN:  But you guys are giving trillions of dollars to these same companies, with the same management. 

KOFINIS:  The reason we did that is because you guys put us—

SHUSTER:  They‘re also requiring, in the case of GM, if you want to talk about that—they‘re also requiring that these contracts be blown up that the unions had, that in order for GM, Chrysler and Ford not to go into bankruptcy, the unions in your contracts, you got to change those.  But there‘s no desire to sort of force the changes on the bonuses, in terms of AIG.  I think that‘s where a lot people have a big problem, think there‘s a total double standard. 

In any case, Brad Blakeman and Chris Kofinis, I promise, you‘re going to have the last word in on all this.  We‘re even going to give away Brad‘s Twitter address coming up. 

Up next, thanks to an event today, the first family is one step closer to becoming loc-avores.  Don‘t worry, I also wasn‘t familiar with that term until today.  Our next guest will explain it and talk about the new effort to grow organic vegetables next to the White House tennis court. 

And your Twitter questions are coming up at the end of the hour. 

Just go to Twitter.com/Shuster1600 or use the link at Shuster.MSNBC.com. 

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.  Some of my fondest childhood memories from growing up in Bloomington, Indiana involve our family‘s backyard.  In addition to all the sports and games my brothers and I played, nearly every spring, we would help our parents plant and cultivate a vegetable garden.  And by the end of the summer, it was like we had our own vegetable factory.  To this day, I am still shocked and amazed when I think of the size and quantity of tomatoes that garden produced. 

Anyway, now you know my bias in favor of this next story.  Today, First Lady Michelle Obama, along with several area school children, broke ground on what will be an organic White House vegetable garden.  The garden, located next to the White House tennis court, will provide some of the raw material for the Obama family meals.  This is the first White House garden in over 60 years, as the first lady noted this afternoon.   

(BEGIN VIDEO CLIP)

MICHELLE OBAMA, FIRST LADY:  No one has planted a garden like this since Roosevelt was president.  And people have done different kinds of gardens, but this is something new and exciting.  And we‘re all excited.  Everyone at the White House is thrilled about this. 

(END VIDEO CLIP)

SHUSTER:  A lot of other people are thrilled as well, including two guys who have been riding around in a bus for months, raising awareness of organic farming and urging the Obama family to plant one on the White House grounds.  The founders of the White House Organic Farm project grew vegetables on the top of their bus.  And they collected tens of thousands of signatures on petitions from people who agree the Obama family should put an organic garden on the White House grounds. 

Joining us now is the founder of the White House Organic Farm Project, Daniel Bowman Simon.  Daniel, first, your reaction to the effort that‘s now been launched? 

DANIEL BOWMAN SIMON, WHITE HOUSE ORGANIC FARM PROJECT:  This is amazing.  This is going to go down in our nation‘s history as one of the most celebrated and emulated ground breakings that we have seen so far. 

SHUSTER:  Why is that?

SIMON:  And the Obama family has really responded to the call from the grass roots.  They campaigned on this promise that they were bringing change to Washington from regular average people around America.  And this is what it is.  And you said you are biassed toward this story and this project, and everybody in the White House seems to be.  And people we met in every state we passed through in America were absolutely in love with this idea. 

A lot of people said it would never happen, but they were willing to sign on to our petition.  And they see the real beauty that can come from people being more reconnected to our agricultural roots as a nation. 

SHUSTER:  Why is it so important for American families in your view to have a family garden? 

SIMON:  It‘s an opportunity for families to get together and have an activity that they can participate in together, that gets them off the couch, gets people exercising, gets people thinking about what they might want to eat together for dinner.  And in these hard economic times, it‘s a way for families to—rMD+IN_rMDNM_for parents to work with their children to show that hard work is needed and that the return on investment—those words are pretty popular this week—the return on investment, there‘s just no greater return on investment than seeds mixed with soil, water and labor.  It‘s a beautiful thing. 

SHUSTER:  Then finally, as far as the White House grounds, it seems like—it does seem like kind of a strange place to have a garden.  Are there any security concerns or issues that the White House needs to be aware of?  It seems like you can‘t just put a garden right next to the White House tennis court? 

SIMON:  There‘s this whole idea of food security.  And I can‘t imagine, with all these recalls we have been seeing lately—it seems like there would be no safer place for the president and his family, his daughters to be getting their food from than right there on the grounds of their own home.  And it‘s a beautiful place where people can come and see and be inspired and follow this amazing leadership that the first family has exhibited today. 

SHUSTER:  Well, I think that if the White House wants to make sure that those vegetables turn out well, they need to import some of that southern Indiana soil to the White House south lawn, because, I guarantee, you have never seen vegetables quite what like what we had growing up.  In any case, Daniel Bowman Simon, congratulations, your wish has come true.  There‘s a garden that‘s going to spring up at the White House. 

Thanks for coming on, Dan.  We appreciate it. 

SIMON:  Thank you so much.  Take care.

SHUSTER:  Up next, President Obama makes history, going on “The Tonight Show” to talk about the economy and his new job at 1600 PENNSYLVANIA AVENUE.  The highlights up next. 

(BEGIN VIDEO CLIP)

LENO:  How cool is it to fly in Air Force One? 

OBAMA:  Let me tell you, I personally think it‘s pretty cool, especially because they give you the jacket with the seal on it? 

LENO:  Oh, yes. 

(END VIDEO CLIP)

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.  And today I thought you should know about President Obama‘s historic appearance on “The Tonight Show” with Jay Leno.  Last night‘s show was amazing.  The president traded laughs with Jay Leno about how life has changed since Mr. Obama‘s previous appearance in October.  And the president spoke about the economy.  He interview started off with a question about the uproar over those AIG bonuses. 

(BEGIN VIDEO CLIP)

LENO:  I know you are angry, because doing what I do, you kind of study body language a bit.  You looked very angry about these bonuses.  Actually stunned. 

OBAMA:  Stunned.  Stunned is the word.  The immediate bonuses that went to AIG are a problem.  But the larger problem is we have got to get back to an attitude where people know enough is enough, and people have a sense of responsibility, and they understand that their actions are going to have an impact on everybody.  And if we can get back to those values that built America, then I think we‘re going to be OK. 

LENO:  But when you said—

OBAMA:  So they were making a legal calculation.  And their legal judgment was not necessarily wrong.  But there‘s a moral and an ethical aspect to this as well.  And I think that‘s what has gotten everybody so fired up.  The main thing—we‘re going do everything we can to see if we can get these bonuses back.  But I think the most important thing we can do is make sure we put in a bunch of financial regulatory mechanisms to prevent companies like an AIG holding the rest of us hostage.  Because that‘s the real problem. 

LENO:  It‘s only 59 days now. 

OBAMA:  Yes, 59 days. 

LENO:  So much scrutiny.  Is it fair to judge so quickly. 

OBAMA:  We are going through a difficult time.  I welcome the challenge.  I ran for president because I thought we needed big changes.  And I do think in Washington, it‘s a little bit like “American Idol,” except everybody is Simon Cowell. 

LENO:  That‘s rough.  When is the dog coming?  I keep hearing about the dog.  When was the dog supposed to be there by? 

OBAMA:  Listen, this is Washington.  That was a campaign promise. 

LENO:  Oh, wow!  Wow!  Man!  And it‘s a Portuguese water head? 

OBAMA:  It‘s not that.  It‘s not a water head. 

LENO:  I don‘t know. 

OBAMA:  I think I‘m going to have a lot of fun with it.  They say, if you want a friend in Washington, get a dog. 

LENO:  Exactly. 

I imagine the bowling alley has been burned and closed down? 

OBAMA:  I have been practicing. 

LENO:  Really? 

OBAMA:  I bowled a 129. 

LENO:  That‘s very good, yes.  That‘s very good, Mr. President. 

OBAMA:  It was like Special Olympics of something. 

(END VIDEO CLIP)

SHUSTER:  The Obama administration realized that line comparing the president‘s bowling skills to Special Olympians was inappropriate.  So on his way from Hollywood to Washington on Air Force One, President Obama called the Special Olympics Chairman Tim Shriver to apologize for his comments. 

(BEGIN VIDEO CLIP)

TIM SHRIVE, SPECIAL OLYMPICS CHAIRMAN:  He apologized.  He recognized that, as he said, a poor choice of words.  He did not intend to humiliate or embarrass anyone, certainly wasn‘t trying to cause pain.  But nonetheless, recognized that it was the wrong way to try to express what he was trying to do, which was to make fun of himself. 

(END VIDEO CLIP)

SHUSTER:  Shriver said he wants this to become a teachable moment for everybody. 

Now it‘s Twitter time.  Back with us is Chris Kofinis and Brad Blakeman.  At this time, we usually judge Twitter videos, with one being bad, ten being good.  Let‘s go judge what the president did on “The Tonight Show?”  Brad, you first.   

BLAKEMAN:  I think the president did very poorly.  And I think part of it had to do about his miscomment about the Special Olympians.  But I also think that he should be on “Meet the Press” and not on Jay Leno.

SHUSTER:  So it sounds like a one or a two.

BLAKEMAN:  What‘s the lowest score.

SHUSTER:  One.

BLAKEMAN:  He‘s got a one. 

SHUSTER:  Wow.  Chris?

KOFINIS:  That‘s a surprising verdict.  Despite the gaffe at the end, which he clearly has apologized for, overall I think it was a good performance.  I think what‘s smart about doing shows like “The Tonight Show” is it exposes your message and your vision for the country to a very different audience, that may not be watching the cable news shows or may not be paying attention to politics on a day-to-day basis.  That, in and of itself, I think is incredibly valuable.  He definitely accomplished that. 

SHUSTER:  Your score? 

KOFINIS:  About seven. 

SHUSTER:  I give it—given that we‘re sort of in this culture now where authenticity is very important for a politician, on that point—he was very authentic.  The fact is some of us, when we try make fun or make fun of ourselves, say things that are stupid.  The president recognized that last night.  I give him about a six or a seven overall. 

Now, we have also got a lot of Twitter questions.  We‘ve got some questions about that segment we about the guy in the garden, the White House.  Brad, you‘ve worked at the Obama.  What does the Obama family need to know about the White House to make sure that this garden is a success? 

BLAKEMAN:  They need to keep the dog out of the garden. 

SHUSTER:  Right. 

BLAKEMAN:  Look, that‘s going to be the safest garden in the world.  It‘s going to be manicured.  It‘s going to be looked after.  They‘re putting a lot of people to work, I‘m sure, on that garden. 

KOFINIS:  Maybe you. 

BLAKEMAN:  I doubt it.  But I think it‘s a great idea.  It‘s a great idea for the first lady to do it, for the first family to do it.  I‘m all for it.  That‘s a ten. 

SHUSTER:  Plus, you can always get the Parks Service guys to thrwo a little extra fertilizer in there if the vegetables aren‘t going so well.  Chris Kofinis, a couple of questions for you about sort of the responsibility, in terms of who should ultimately be responsible for AIG.  Is there any one particular person that you would think it would be appropriate to be some part of criminal investigation?  Is there any particular blame that lies anywhere? 

KOFINIS:  Listen, I think Liddy shares some blame as the CEO.  Secretary Geithner also shares some responsibility, as does the Federal Reserve Chairman Bernanke.  But at the end of the day, this was a mess that was created a long time ago.  And I think what needs to happen here is put in the measures to make sure that this doesn‘t happen again.  I think this is going to be a manageable event.  And the American people are going to move forward.  And I think Congress is definitely acting in an appropriate way. 

But I think what will be potentially dangerous politically for both parties is if people start seeing that this happens again and again and again.  That‘s when it‘s going to be problematic. 

SHUSTER:  Chris Kofinis, Brad Blakeman, thank you both very much.  As we promised, Brad‘s Twitter address is Twitter.com/BlakemanB.  Go for it everybody.  That‘s the view from 1600 PENNSYLVANIA AVENUE tonight.  I‘m David Shuster.

Remember, get the latest political news and a sneak peak of what‘s coming up on the show sent straight to your inbox with the 1600 daily briefing.  Sign up at Shuster.MSNBC.com or text Penn to 622639.  Or Twitter, Twitter.com/Shuster1600 or BlakemanB for Brad. 

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

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