updated 4/3/2009 10:36:30 AM ET 2009-04-03T14:36:30

Guest: John Harwood, Darrell Issa, Bob Casey, Michael Isikoff

(BEGIN VIDEOTAPE)

DAVID SHUSTER, HOST (voice-over):  Tonight, the global effort.  President Obama and world leaders agree to loan developing countries over $1 trillion.

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES:  This alone is not enough, and obviously the actions that each of us take in our individual countries are still absolutely vital.

SHUSTER:  An update on the G-20 summit and a closer look at the president in his comfort zone. 

Back home, Rod Blagojevich was indicted this afternoon while vacationing at Walt Disney World. 

“Follow the Money.”  A former AIG executive got grilled today while testifying to Congress. 

UNIDENTIFIED MALE:  We can‘t get to this feeling of everybody‘s neutral here.  We‘ve got to get answers. 

UNIDENTIFIED MALE:  Well, I‘m about to answer if you permit me. 

SHUSTER:  Plus, Karl Rove criticizes President Obama for playing politics.  Rove lands in “Hypocrisy Watch.” 

And the things I thought you should know—it was the queen who broke protocol first with Michelle Obama; the traveling White House has March Madness...

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY:  We‘ve already had high-level meetings about how it is we‘re going to watch the Final Four. 

SHUSTER:  ... and a Twitter Time special.  I‘ll address this show‘s big transition.

All tonight on 1600 PENNSYLVANIA AVENUE.

OBAMA:  Thank you, everybody.  Appreciate it. 

(END VIDEOTAPE)

SHUSTER:  Welcome to the show, everybody.  Day 72 of the Obama administration.  In this one, we‘ll focus back on some of the Chicago connections between the Obama crowd and Illinois governor Rod Blagojevich.

The former governor was indicted late this afternoon on 16 felony charges, 19 in all, including conspiracy, wire fraud, extortion.  At first glance, the indictment covers a wide period of time, five years, and there is some intriguing information about a period of time in December of 2004 when it appears that there was an effort, at least by Blagojevich, to try to get U.S. attorney Patrick Fitzgerald possibly fired. 

Again, there were some conversations recorded in which there was at least the appearance that Blagojevich thought that there was an effort—that there could be an effort made to reach out to Karl Rove and somehow try to get the U.S. attorney Patrick Fitzgerald, who was leading the Rezko investigation, and was also the CIA leak investigation, that there might be some way to get Fitzgerald fired.  Again, that was part of the conversation that is part of the indictment. 

We‘re looking through the details and we will have more information on the 19-count indictment against former Illinois Governor Blagojevich later in the show. 

But first, money talks.  And on this day of the Obama administration, the big focus, of course, was on the G-20 summit.  And it focused almost exclusively on curing the ailing global economy. 

The prescription?  Tougher financial regulation and a trillion-dollar injection to get the international economy moving. 

President Obama hailed the developments today as very productive.  The U.S. and U.K. are supporting tougher action against tax havens and creating a watchdog board to alert countries of the potential economic risks while resisting calls for a global financial cop.  And Mr. Obama explained how helping foreign countries get money to buy will help American companies who want to sell and get the whole U.S. economy moving again. 

(BEGIN VIDEO CLIP)

OBAMA:  We want to get Caterpillar back on its feet.  If we want to get all those export companies back on their feet, so that they are hiring, putting people back to work, putting money in people‘s pockets, we‘ve got to make sure that the global economy as a whole is successful.  And this document, which affirms the need for all countries to take fiscal responses that increase demand, that encourages the openness of markets, those are all going to be helpful in us being able to fix what ails the economy back home. 

(END VIDEO CLIP)

SHUSTER:  The prospect of a potential fight between France and Germany, who wanted much harsher regulations, turned out to be much ado about nothing.  And all the world leaders kept their seats until the end of the summit. 

But there were some provocative comments about America‘s role in causing and resolving the financial crisis, including one from summit host, British Prime Minister Gordon Brown. 

(BEGIN VIDEO CLIP)

GORDON BROWN, BRITISH PRIME MINISTER:  We believe that in this new global age our prosperity is indivisible.  We believe that global problems require global solutions.  We believe that growth to be sustained must be shared and that trade must once again become an engine of growth.  The old Washington consensus is over. 

(END VIDEO CLIP)

SHUSTER:  But despite that, President Obama, the new kid on the global block, is winning a lot of international praise today and seemed to be in his element, smiling and joking around with the G-20 leaders and fielding questions and cracking jokes at his news conference. 

(BEGIN VIDEO CLIP)

OBAMA:  Your American counterparts will tell you I‘m terrible with those little catch phrases and sound bites.  So I haven‘t come up with anything catchy yet, but if you have any suggestions, let me know.  I‘ll be happy to use them. 

If it‘s just Roosevelt and Churchill sitting in a room with a brandy, you know, that‘s an easier negotiation.  But that‘s not the world we live in. 

And you know, we‘re not doing bidding here. 

Your prime minister is a wonderful man. 

UNIDENTIFIED FEMALE:  Thank you.  I agree.

OBAMA:  And—well...

UNIDENTIFIED FEMALE:  I agree. 

OBAMA:  You know, the—did you have something to do with that or—you seem to kind of take credit for it a little bit there. 

UNIDENTIFIED FEMALE:  Really proud of him. 

OBAMA:  Of course.  You should be proud of him.  I‘m teasing you. 

(END VIDEO CLIP)

SHUSTER:  But even overseas all politics is local. 

President Obama spent a lot of time during that news conference trying to draw the line between the talks happening at the G-20 and the tangible, positive impact it will have on the economy here in the United States. 

And for more on that, let‘s go live to London and CNBC‘s chief Washington correspondent, John Harwood, who is traveling with the president. 

And John, the world leaders pledged $1 trillion to the IMF.  The big picture, though, how does that come back around and help the average family back here in the United States? 

JOHN HARWOOD, CNBC CHIEF WASHINGTON CORRESPONDENT:  Well, look, if growth is restored to the world economy, that‘s going to benefit everybody.  And look, David, at the reaction of the American stock markets this afternoon. 

The administration, and European markets, as well—the administration has to look at that as a sign that perhaps this agreement, though it fell short in some ways on specific pledges of stimulus, did provide a shot of what Gordon Brown, the British prime minister, called the oxygen of confidence for the world system.  That‘s positive in itself.  And I think the administration and the other 19 world leaders moved the ball, to some degree, down the field today. 

SHUSTER:  What are the Obama officials saying, John, about this comment from Gordon Brown that the era of Washington consensus is over? 

HARWOOD:  Well, that was a very interesting moment in the news conference.  I was in the room there, and Obama, as you suggested by those clips, David, was very much enjoying himself. 

When Obama was asked about the Washington consensus, he cast that as essentially a description of the conservative, deregulatory, economic philosophy that had predominated since the Reagan era.  So, to some degree, that allowed him not to cast it as a rebuke of the United States, but a rebuke of the kind of leadership that he was replacing. 

I also think that moment when he talked about Roosevelt and Churchill over brandy, rewriting the rules of the international marketplace, that was something that showed how comfortable he was personally in this new environment, sharing the stage with other leaders, because partly, it‘s about his story, as well.  That is, he stands for breaking up the old club, somebody who made history by becoming the first African-American president, and I think he did not find it uncomfortable to say, yes, it‘s not just America anymore. 

SHUSTER:  John, I want to ask you about French President Sarkozy.  There were some reports that he and the Chinese president, Hu Jintao, got very heated, and that it was actually President Obama who pulled Sarkozy aside to try to cool things off. 

What do we know about that incident? 

HARWOOD:  Well, we know from White House officials that President Obama helped to resolve that disagreement.  But I‘ve got say, in line with your comments earlier in the intro, Sarkozy was a bit of a paper tiger here.  You know, all this talk about, ooh, I‘m going to walk out of the summit, he certainly looked like he was smiling in that class photo.  And it was, from all accounts that we could see, a cordial end to the summit, even if there was some tension behind the scenes. 

SHUSTER:  President Obama was asked about how he‘s different from President Bush.  And first of all, how did he respond to that?  And what is the feeling over there about President Obama?  And compare and contrast that with the Bush administration. 

HARWOOD:  Well, he was taking that question kind of gingerly in the beginning.  He said, I wasn‘t with President Bush at his past summits.  I don‘t want to make comments. 

But he did make a reference to the need to project humility, to listen.  These are all ways I think in which, though he doesn‘t want to say so out loud, the Obama administration thinks of itself as drawing a contrast with President Bush. 

There is no question it is a night-and-day difference in terms of the popularity of this president abroad compared to President George Bush.  And even Gordon Brown, who said the old Washington consensus is over, there is no—none of these leaders wanted to bask in the Obama glow as much as Gordon Brown. 

You would have thought they were long lost fraternity brothers, the way they related to one another yesterday.  And Gordon Brown talked about the exhilarating leadership President Obama was providing.  He wanted to get some of that reflected glory. 

SHUSTER:  CNBC‘s John Harwood, also of “The New York Times,” coming the big summit over in London.

So intriguing on so many levels.  And John, thanks for coming on the show.  We appreciate it. 

HARWOOD:  You bet. 

SHUSTER:  Coming up next, we are following the money.  Last fall, AIG lost more than any company in U.S. history.  Today, a former CEO testified before Congress.  There were some fireworks and some incredible claims about who really should be blamed. 

At the half-hour, President Obama hits the comfort zone at the G-20 summit.  We will take a closer look at this lighter moment, analyze the Obama psyche, and tell you about the president‘s role as world mediator in chief.

The stories that are coming out are intriguing.  That‘s at the half-hour.

And late, a special edition tonight of Twitter Time.  I‘ve gotten all of your questions about the transitions coming to this hour.  I will address those issues in a special comment.

And as always, you can write to us at twitter.com/shuster1600, as well as shuster.msnbc.com.

(COMMERCIAL BREAK)

SHUSTER:  Today, a House congressional committee tried to better understand AIG, the insurance giant that lost over $60 billion last fall and has since received over $150 billion in bailout money from U.S.  taxpayers.  The committee heard from former CEO Maurice “Hank” Greenberg, and in dramatic fashion, he flatly declared that the government of AIG has been a failure and suggested it might have been better for AIG and U.S.  taxpayers to let AIG go into bankruptcy.

Greenberg led AIG for nearly four decades until he was forced to retire in 2005 because of fraud charges.  Today, Greenberg again blamed his successors for the massive losses at AIG‘s Financial Products Unit.

(BEGIN VIDEO CLIP)

REP. EDOLPHUS TOWNS (D), NEW YORK:  After you left, did AIG FP become a renegade operation?

MAURICE “HANK” GREENBERG, FMR. AIG CEO:  Well, I wouldn‘t know if I‘d call it renegade.  I think they got greedy, they went off on a tangent, and wrote, in nine months, more than double the amount of business that we had put on in financial products than we did in the past seven years. 

(END VIDEO CLIP)

SHUSTER:  Greenberg gave Congress a 10-point plan for fixing AIG.  He recommends cutting down on government ownership and installing a new management team.

But in a statement to the committee, the current management team, which includes some of those who are responsible for the mess last fall, fired back, saying, “Given that Hank Greenberg led AIG into the credit default swap business, has repeatedly refused to testify under oath about a transaction he initiated when he was still AIG‘s CEO, and is being investigated by the SEC and the Justice Department, we don‘t understand how he can be viewed as having any credibility on any AIG issue.”

The ranking Republican on the House Oversight Committee, Congressman Darrell Issa of California, noted today that Greenberg is involved in nine lawsuits and a securities fraud investigation. 

Congressman Issa joins us now. 

And Congressman, what did you learn today about AIG? 

REP. DARRELL ISSA ®, CALIFORNIA:  Well, first of all, we learned that Hank Greenberg will reinterpret history to favor his own memory of it.  Forty-three percent of all of AIG‘s credit default swaps occurred while he was still CEO. 

Having said that, we did also get the insight of somebody who had built this company from the ground up, who at least recognized that we had no obligation as American taxpayers to pay for AIG‘s FP failure and, in fact, that‘s where $40 billion or $50 billion of U.S. taxpayer dollars went, to European banks it didn‘t need to. 

SHUSTER:  When a former CEO like Greenberg says that the bailout, over $150 billion of taxpayer money for AIG, when he says that that has been a failure, has been useless, what‘s your reaction? 

ISSA:  Well, I think it‘s hindsight.  Of course, when you get $180 billion into an enterprise that wasn‘t worth $180 billion, it‘s pretty easy to see that it was a failure.  So I would take some of what he said with a grain of salt. 

The fact, though, that the approach of avoiding bankruptcy, while paying in huge amounts of dollars in hard cash rather than in guarantees and rather than using bankruptcy, was instructive.  I think it was also appropriate, as you, in your lead-in mentioned, that all of us on the dais understand that Hank Greenberg comes with a lot of cloud of suspicion over his head.  He was at the helm when $1.6 billion in fines were paid based on securities fraud, so this is somebody who built a company, understands the industry, but at the same time, we can‘t accept his revisionist history. 

SHUSTER:  One of the things that was also striking, though, is that he talked about Edward Liddy, who‘s the CEO, the current CEO, and he basically said that Edward Liddy is out of his league in trying to fix this. 

Here‘s the testimony.  I‘ll get your reaction on the other side. 

(BEGIN VIDEO CLIP)

GREENBERG:  AIG is a global company.  It operates in 130 countries. 

There is no company like it in the world. 

You have to understand the culture of different countries.  You have to understand how business is done in these countries.  It is not an on-the-job training program. 

Liddy is a nice person.  I have nothing against Liddy as an individual.  He ran a domestic insurance company and he‘s a good man.  I have no problem with that.  But he‘s not—doesn‘t have the background for the job that needs to be done. 

(END VIDEO CLIP)

SHUSTER:  Congressman Issa, as you noted, $180 billion, and it‘s up to essentially Edward Liddy, the CEO, to try to untangle this mess. 

Do you still have confidence in the CEO who‘s running AIG today? 

ISSA:  Well, I think in this case there is some reason to question whether or not without the kind of legacy, knowledge that Hank Greenberg or anyone else that had been at the helm for a long time has, it‘s likely, particularly with government help, that Liddy will fail further. 

SHUSTER:  Well, Hank Greenberg also said that, essentially, you should have let AIG go bankrupt, that that would have been better than what‘s happened.  What‘s your reaction to that?  Because it does seem to be on the minds of so many Americans who want to know, why on earth did we do this? 

We can‘t figure out where the money has gone.  AIG lost all this money, $180 billion.  What do we have to show for it?  How do you explain that to people? 

ISSA:  Well, as a long-time businessman, I want to define a little bit of what I heard Hank Greenberg say.  He didn‘t say let them go bankrupt.  What he said was use bankruptcy to in fact get out of this situation. 

In a Chapter 11, the unsecured creditors, including all kinds of the recipients of credit default swaps, these European banks, would have simply had to go find other ways to reinsure the products they had because the default would have occurred.  That would have protected the amount of core dollars that were really obligated by the insurance entities. 

And I think that was an important thing that came out of today‘s hearing, is that the credit default swaps were in a non-insurance entity that had little or no assets and, to a great extent, you know, people had to understand they were vulnerable to bankruptcy.  And in this case, by avoiding bankruptcy, Chapter 11 reorganization, the United States government and Hank Paulson, when he was at the helm, gave gifts, effectively, of tens of billions of dollars to European entities instead of using bankruptcy to say, you‘re on your own. 

SHUSTER:  Well, Congressman, it is an incredible mess to try to sort out.  We appreciate you coming on.

AIG is just—what a headache. 

ISSA:  Absolutely.

SHUSTER:  And good for you for having the hearing and trying to sort it out and figure out what‘s best for the country with this. 

Congressman Darrell Issa, Republican from California. 

ISSA:  Thank you.

SHUSTER:  Coming up, Karl Rove talks about presidential power and whines about the Obama team playing politics. 

“Hypocrisy Watch” is next. 

Plus, the first lady got choked up today while visiting with schoolgirls in London. 

(BEGIN VIDEO CLIP)

MICHELLE OBAMA, FIRST LADY:  All of you are jewels.  You are precious and you‘ve touch my heart.  And it is important for the world to know that there are wonderful girls like you all over the world. 

(END VIDEO CLIP)

SHUSTER:  What a moment that was.  But a lot of people in London are still buzzing about a potential breach in Buckingham Palace protocol.  The breach was by Queen Elizabeth.  I‘ll explain later in the things I thought you should know.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.

Former Bush adviser Karl Rove is criticizing President Barack Obama for playing politics. 

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

First, the background. 

Karl Rove is a paid contributor to Fox News and pens a column for “The Wall Street Journal.”  In his latest column, Rove wrote, “Team Obama wants to remind its adversaries it has plenty of power.  And it does.  The question is whether the White House will wield it responsibly.”

Karl Rove is concerned about wielding power irresponsibly? 

Karl, you mean like outing a CIA agent?  That‘s what you were involved in. 

Joe Wilson pointed out that the White House misled the American people in the run-up to the Iraq war.  And you, Vice President Cheney, and Scooter Libby felt the need to smear Wilson.  And in so doing, you helped blow the cover on Wilson‘s CIA operative wife. 

Remember that? 

This morning on Fox News, Rove also whined about an ad campaign Democrats are running against congressional moderates. 

(BEGIN VIDEO CLIP)

KARL ROVE, FOX CONTRIBUTOR:  It‘s fine to say the White House is focused on getting our message out to these members, but to sit down and coordinate on ad copy...

(END VIDEO CLIP)

SHUSTER:  First of all, there is no evidence of anybody sitting down and coordinating on ad copy.  But it is interesting that Karl Rove would complain about sitting down to coordinate political messages. 

According to “TIME” magazine, in 2001 Rove regularly dispatched White House aides to attend conservative coalition lunches.  “Each Wednesday, Rove dispatched a top administration official to attend the regular conservative coalition lunches.  When activists call his off with a problem, Rove doesn‘t pass them off to an aide.  He often responds himself.”

“The Wall Street Journal” reported in 2003 that Karl Rove, or his top aide, “... visited nearly every agency to outline White House campaign priorities, review polling data, and on occasion, call attention to tight House, Senate, and gubernatorial races that could be affected by regulatory action.”

Karl, it must be so frustrating to be reduced to writing columns and pontificating on Fox News.  Nonetheless, given your actions over the years, when you whine about the Obama White House possibly playing politics, that‘s hypocrisy.  And it‘s wrong. 

Up next, those reports about a fight at the G-20 summit between the president of China and the president of France and that the tensions were cooled by President Obama.  What is it about the president‘s psyche that makes him the world‘s mediator in chief? 

Up next, we will talk with Pennsylvania Senator Bob Casey. 

Plus, the president did have a few lighter moments at the world summit, including the class photo.  We‘ll take a closer look at the story behind this picture, a picture that has painted a thousand words about each of the leaders and what they were doing in it.

That‘s next on 1600.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE.  President Obama is off to France tomorrow.  He completed the first leg of his first trip abroad as president, today‘s G-20 summit.  Was he successful?  For more, let‘s bring in Senator Bob Casey, Democrat from Pennsylvania.  And, senator, you are a staunch supporter of the president during the campaign.  You traveled with him.  The president had to convince world leaders that he has the right answer on this stuff.  What is it about his personality that worked for him? 

SEN. BOB CASEY (D), PENNSYLVANIA:  Well, David, I think what these world leaders saw this week is what we saw not only on the campaign trail, but since he‘s been inaugurated, that he has great leadership skills.  He takes a very business-like approach to the challenges we face here at home, economically.  And I think we‘ve seen some—a good foundation laid this week to get more than a trillion dollars agreed upon, and laying a foundation. 

One meeting like this does not a policy make, and it‘s not going to solve the world‘s economic crisis right away.  But I believe he demonstrated the same kind of leadership, the same kind of vision, and the same kind of commitment to focusing on our economic challenges that he‘s demonstrated here at home, and bringing people together, even when it‘s a difficult thing to do. 

SHUSTER:  Senator Casey, there was a moment during the class photo that seemed to reveal so much about President Obama‘s sort of comfort zone.  And that is all the leaders were sort of standing around and the president was essentially mugging for the camera with Medvedev, and some of the other leaders were sort of serious.  Sarkozy—you don‘t see in that cropped version—was seen baffled.  Is there anything about the president sort of being around other leaders, who are dealing with some of the same economic challenges that enables him to lighten up or to enjoy himself or sort of be the class clown type of guy? 

CASEY:  Well, look, I believe that this president understands what it is to be the leader of the United States, and to be an American.  In the best sense of the word, an American is someone who has confidence, but also respect for other cultures, other nations, and other leaders.  He‘s demonstrating that. 

I believe he‘s done the same thing here in Washington.  Even Republicans that I know, who won‘t say it publicly, when they spend time with him in a personal way, in a human way, come away impressed with his integrity, his ability to lead and inspire, and his ability to try to find areas of common ground where people can work together.  I think these world leaders saw the same thing this week. 

SHUSTER:  There was an intriguing moment at the press conference, a pretty difficult question, when the president was asked about President Bush and sort of the different approaches.  And here‘s how President Obama answered that.  Watch. 

(BEGIN VIDEO CLIP)

OBAMA:  You know, I didn‘t accompany President Bush on his various summits, so I don‘t know how he was operating.  And I won‘t, you know—I won‘t warrant a guess on that.

We exercise our leadership best when we are listening, when we recognize that the world is a complicated place, and that we are going to have to act in partnership with other countries, when we lead by example, when we show some element of humility. 

(END VIDEO CLIP)

SHUSTER:  Senator, what was it about the president this week that the public, and especially Europeans, saw that sort of matches up with what people who tend to be close to the president, like you, have known or have essentially been able to know for sometime? 

CASEY:  Well, David, one of the great qualities of great leaders is the ability to listen, not just to communicate, and to use your ability as a communicator to speak to people or engage people, but also to listen.  This is a president who listens carefully.  He‘s someone who, from the moment you meet him and spend time with him, conveys a sense of mutual respect.  And that is true whether he‘s dealing with an international leader, the leader of a major nation, or whether he‘s dealing with people on the campaign trail that he meets, that are perfect strangers to him. 

That‘s very important that the leader of our country, the United States, projects that kind of mutual respect, even when we disagree.  One thing about President Obama, when he disagrees with you, he makes it very clear, but he also tries to find areas of common ground.  That‘s going to be very important when we‘re trying to tackle not only our domestic economic challenge, but the world economic challenge as well.  And I think he‘s off to a great start. 

SHUSTER:  Pennsylvania Democratic Senator Bob Casey, thanks so much for coming on tonight.  We appreciate it. 

CASEY:  Thank you, David. 

SHUSTER:  You‘re welcome. 

For more on the president‘s trip to Europe, let‘s bring in our panel now, Democratic strategist Chris Kofinis and Republican strategist Brad Blakeman.  Brad, we‘re getting these reports that Sarkozy and Hu Jintao from China, Sarkozy, the French leader, got into something of a fight, and that it was President Obama who pulled Sarkozy aside, got him calmed down.  What do you make of it? 

BLAKEMAN:  Well, the president may be a good referee or a good mediator, but that doesn‘t necessarily make him a great leader.  This is his first step on the world stage.  And there are two things I don‘t like that have come out of this so far.  One is he was only able to get a trillion dollars out of 20 nations for an International Monetary Fund, when we‘re kicking in trillions of dollars. 

Number two, he got a communique which pretty much establishes an international regulatory commission, which will have an effect over our markets and how we do business in the United States.  That‘s fundamentally wrong.  Leadership would have said, we‘re not making an agreement that‘s not worth the paper it‘s written on.  You‘re not going to interfere in U.S.  markets and you‘re not going to blame us for the problems you‘re experiencing because of what your markets have done. 

SHUSTER:  I thought that the goal was to get 500 billion, which means that they doubled that. 

BLAKEMAN:  Lower expectations, yes. 

KOFINIS:  I think Brad may be the only person in the entire world that thinks this was not a successful trip.  It was a resounding success on all fronts.  In terms of—you know, in one area which I think is sometimes under estimated, which is in terms of the image and just the perception of this event, and the focus of the message the president had, in terms of emphasizing cooperation, emphasizing the reality that we have an inter-dependent world.  And in that inter-dependent world, we have to have allies that we can work together on multiple, difficult issues.

I think he has established and basically re-established the relationships that were frayed under eight years of Bush.  In terms of the substantive accomplishments, announcing a trillion dollars of aid packages for troubled economies, new regulations to deal with hedge funds and tax havens, you know, tripling the amount of aid they‘re going to be pouring into the IMF, these are all significant accomplishments, not to mention the fact that just yesterday they also announced new Start negotiations. 

(CROSS TALK)

BLAKEMAN:  The president is surrendering our right that we have here in our country.  One day.  You know why?  Because he‘s out of the country.  He‘s out of the country.  Maybe he should stay out of the country.  The markets will do better. 

SHUSTER:  Here‘s the thing: I don‘t think most Americans follow the nitty gritty details of a trillion dollars, regulatory.  But you know what they see?  They see the president solving personal issues between leaders.  Everyone sort of wants to be around the president. 

BLAKEMAN:  He‘s a new kid.  What do you expect? 

KOFINIS:  It‘s more than that. 

SHUSTER:  He‘s the one bringing people together.  He‘s at the center of attention.  Everyone seems to want to be near him.  Americans want the president to have that role.  George W. Bush did not. 

(CROSS TALK)

BLAKEMAN:  He was treated like a rock star, the same as President Obama is being treated like a rock star, because he‘s the president of the United States. 

KOFINIS:  There is a fundamental difference.  You saw it in terms of the tone and how he was interacting with these world leaders.  You know—

BLAKEMAN:  For thee camera? 

KOFINIS:  The art of diplomacy is also the art of the personal interrelationships that you develop with these foreign leaders.  And you‘ve seen real relationships based on substance. 

BLAKEMAN:  One day does not make a relationship.  Shaking hands does not. 

SHUSTER:  We‘re going to take a break.  We‘re going to continue the conversation on this.  We‘re also going to talk about Blagojevich, who got indicted today. 

Coming up, Rod Blagojevich, it was a 19-count indictment, 16 felony charges.  So what does the governor plan to do now?  Well, maybe he‘ll come back from Disney World.  That‘s where he spent the day. 

Plus, it‘s a big basketball weekend.  The Final Four championship games are coming up.  But President Obama will be in Europe.  So how will he watch the games?

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE.  In December, he was arrested on corruption charges.  In January, he was impeached by the Illinois legislature and removed from office.  Today, former Illinois Governor Rod Blagojevich was indicted on 16 felony counts, including racketeering, conspiracy, wire fraud, extortion, and making false statements to federal agents. 

Blagojevich‘s brother Robert, who ran his campaign fund, two former aides and two businessmen, were also indicted.  Before and throughout the investigation as his innocence became more and more impossible to believe, Rod Blagojevich repeatedly invited scrutiny. 

(BEGIN VIDEO CLIP)

ROD BLAGOJEVICH, FMR. ILLINOIS GOVERNOR:  There‘s nothing but sun shine hanging over me.  Let me answer that.  True question is—by the way, I should say, if anybody wants to tape my conversations, go right ahead. 

I consider myself the anti-Nixon.  Remember during Watergate, Richard Nixon fought every step of the way to keep his tapes from being heard.  I want just the opposite.  I want them all heard now, right away. 

(END VIDEO CLIP)

SHUSTER:  Joining us now to tell us more about the U.S. attorney‘s indictment and what has been revealed against Blagojevich is “Newsweek” senior investigative correspondent and MSNBC contributor Michael Isikoff.  Michael, I want to give you full on air credit.  You were the first one to report out that in this indictment are the names of people who are linked to Karl Rove.  Explain the connection and what Blagojevich seemed to be after in these conversations. 

MICHAEL ISIKOFF, “NEWSWEEK”:  I don‘t want to make too much of that, but it is going to be of interest to people in Washington when you look at the various tentacles of this investigation, which is quite broad.  It doesn‘t just go to the corruption within the state of Illinois, but goes to other figures. 

One of the most intriguing elements is that as Patrick Fitzgerald, the U.S. attorney in Chicago, is heating up his investigation into Blagojevich, Blagojevich had discussions with Tony Rezko, the indicted and convicted fixer, who, of course, was close to now President Obama, and others, about removing Patrick Fitzgerald from his position as US attorney. 

You might ask, how can the Democratic governor of Illinois arrange to have the US attorney in Chicago removed?  There was testimony in Rezko‘s trial that certain individuals close to Blagojevich, including a Republican lobbyist in Springfield, were talking to people who could get to Karl Rove about removing Patrick Fitzgerald.  Now that‘s—nothing in this indictment charges Karl Rove with wrongdoing. 

SHUSTER:  And there‘s no indication that they even went to Rove.  But at least there was an idea by Blagojevich that maybe there was a joint interest between Blagojevich wanted Fitzgerald off his back, and thinking maybe if I can convince Karl Rove, it would also be beneficial to him. 

ISIKOFF:  Right.  There was testimony in the Rezko trial about this.  What‘s significant is it‘s now repeated, the allegation is repeated in the Blagojevich indictment. 

SHUSTER:  Now, this includes—the overall indictment includes not just efforts to possibly sell Obama‘s Senate seat, but a wide ranging series of transactions. 

ISIKOFF:  Right.  Essentially Fitzgerald, the U.S. attorney, accuses the entire Blagojevich crowd of being a criminal enterprise.  And that crowd includes the governor of Illinois, Blagojevich, his chief of staff, who‘s cooperating with the investigation, his chief counsel, his brother, and his chief fund raiser, Tony Rezko, and Chris Kelly, another big fund raiser.  So what it alleges is that even before Blagojevich took office as governor of Illinois, he had discussions with these people about arranging to use the power of the governor to make appointments and steer contracts in ways that would financially benefit both him and his alleged conspirators. 

SHUSTER:  “Newsweek” investigative reporter Michael Isikoff, also MSNBC contributor, great stuff as always.  It will be a fascinating case to watch, especially with some of the names in this.  Let‘s bring in our political panel to talk about the implications.  Chris Kofinis is a Democratic strategist.  Brad Blakeman is a Republican strategist.  Chris, is there at least an appearance problem, given that Tony Rezko plays a prominent role in this indictment, would be a key figure in terms of testimony.  That, by its nature, dredges up some of the sort of unseemly connections that Republicans like to portray between Rezko and President Obama. 

KOFINIS:  No.  I mean, there is nothing here that the Obama administration or anybody associated with the Obama administration has to be worried about.  This is a Blagojevich problem, and a very serious Rod Blagojevich problem.  I think it‘s telling that he was at Disneyland or Disney World, wherever he was today, because this thing has taken on its own kind of, you know, comical, cartoonish character, this whole escapade. 

But this is something that he‘s going to have to deal with.  These are incredibly serious charges.  And I do say that it now puts in the bright light how smart it was for the legislature to impeach him, because this would have been just another terrible event for the state of Illinois to deal with. 

SHUSTER:  Brad, you‘re smiling.  I think you have a different view. 

BLAKEMAN:  I think the acorn doesn‘t fall far from the Obama tree. 

SHUSTER:  How is that? 

BLAKEMAN:  No.  I‘m using a phrase that we used during the campaign about Acorn, and the attachment that they had to corrupted activities.  This is just another Democratic—

ISIKOFF:  To a bush? 

BLAKEMAN:  No, to the campaign, where the Democrats seem to, with Congressman Jefferson and Blago and Rezko and the rest, this is another cycle of corruption within the Democratic party, where you see one of the leaders of their party, a leader of a huge state of Illinois, gets taken down by corruption.  And you start to see the connections between President Obama and these individuals, not that there‘s any direct link to the Blago affair.  But there is certainly a link to the players within the Blago affair, Rezko and others. 

So not to say the president‘s implicated, but they seem to travel in the same circles. 

KOFINIS:  This is ridiculous.  I mean, here‘s a distinct difference.  You saw Democrats come out in force against then Governor Blagojevich, unlike I think the Republicans that have tried to protect their individuals when they‘ve been in trouble. 

BLAKEMAN:  No. 

KOFINIS:  Including folks like Scooter Libby and others.  There is a fundamental difference. 

SHUSTER:  To me, the key is will anybody like Valerie Jarrett, Rahm Emanuel, end up having to testify?  What role would they play in their testimony?  Any indication that would happen? 

ISIKOFF:  Not clear from this indictment that they will.  The Senate stuff gets—which was the central part of the press conference when Fitzgerald unveiled the criminal complaint, when Blagojevich was arrested in December, gets much lesser billing in this indictment.  It‘s there.  Some of the allegations are there.  Most of them are there, but they‘re repeated in much more bare bones form. 

A couple points.  It is unclear from reading this indictment closely whether or not Tony Rezko is on board and cooperating with the investigation.  We thought he was.  If this was going to go anywhere that would hurt—anything that would make the Obama people nervous, it would be Tony Rezko. 

SHUSTER:  Great point.  Great point.  Michael Isikoff from “Newsweek” and MSNBC, Chris Kofinis, Democratic strategist, Brad Blakeman, Republican strategist, thank you all for coming on tonight.  We appreciate it. 

Up next on 1600, Buckingham Palace is defending a personal moment between the queen and First Lady.  It‘s something I thought you should know.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.  There is a lot going on today.  Here are a few things I thought you should know.  All eyes are on First Lady Michelle Obama right now, as she travels across London, going to the opera with the other first ladies and tea with the queen.  The British media is fascinated by her, calling her Mighty Michelle and the new Jacqueline Kennedy. 

It‘s not just the media either.  The First Lady got a rock star welcome by a group of school girls in London today.  She even high-fived one of them, before giving a speech on education.  Mrs. Obama got all choked up, but then told the students it‘s hip to be square. 

(BEGIN VIDEO CLIP)

MICHELLE OBAMA, FIRST LADY:  I‘ve never cut class.  Sorry, I don‘t know if anybody‘s cutting class.  I never did it.  I loved getting A‘s.  I liked being smart.  I liked being on time.  I liked getting my work done.  I thought being smart was cooler than anything in the world. 

(END VIDEO CLIP)

SHUSTER:  But what really has tongues wagging across the pond is did the First Lady break protocol when she put her arm around the queen?  Apparently, touching the queen is a big no-no.  But the queen didn‘t seem to mind.  She put her hand on Michelle Obama‘s back first. 

A spokesperson for the queen says everything is cool, issuing this statement: “it‘s obvious that it was a mutual sign of affection and appreciation between the queen and Michelle Obama.  There is no offense.  The reception was an informal occasion.  There‘s no breach of protocol.” 

According to the BBC, Queen Elizabeth told Michelle Obama, quote, now we‘ve met, will you please keep in touch?  The president will be in Europe through the weekend.  That means he will be missing some big basketball games, the Final Four and championship game Monday night.  But I have a feeling the president will be able to watch the games.  Press Secretary Robert Gibbs told CNN reporter David Brody they‘re doing everything possible to make sure it happens. 

(BEGIN VIDEO CLIP)

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY:  We‘ve already had high level meetings about how it is we‘re going to watch the Final Four and the final game.  I‘m not entirely sure we‘ve come up with a satisfactory outcome. 

DAVID BRODY, CNN CORRESPONDENT:  Is that going to be on the record? 

You going to tell us about that? 

GIBBS:  We‘ll bring you senior administration officials to brief you on those meetings.  We have to figure out some way to watch the finals. 

BRODY:  You going to be able to do that? 

GIBBS:  We‘re working on it. 

BRODY:  I bet you are. 

GIBBS:  The last thing we want to hear is just what the final score was and not see the game. 

(END VIDEO CLIP)

SHUSTER:  President Obama has only one team left from his Final Four picks, North Carolina. 

Those are a few things that I just thought you should know.  Finally, to set up this final segment, I want to play an encore version of something we first played last week. 

(SINGING)

SHUSTER:  That was Jonathan Mann from RockCookieBottom.com, who wrote that fun song for the show the other week.  I want to publicly thank Jonathan again and thank all of you who have supported and watched 1600.  As you may or may not have heard, I‘ve been given a new assignment.  And because of scheduling issues, this is my last day anchoring the show. 

These four months hosting 1600 have been a remarkable experience.  The staff and I worked hard to bring you the world of Washington politics in a compelling and engaging fashion, and we really appreciate your encouragement and support. 

I ask you now to give that same support to my new colleague Ed Schultz.  He will have a provocative program in this hour starting Monday.  And it will be worth watching. 

As for me, I‘m not abandoning MSNBC prime time.  I‘ll be hosting COUNTDOWN when Keith is off, like tonight.  Plus I‘ll be pitching in on HARDBALL on occasion. 

Furthermore, I‘m excited about the assignment I will be starting in a few weeks.  From 3:00 to 5:00 p.m. Eastern, I will be co-anchoring a brand new show with my colleague and friend, Tamron Hall.  It‘s going to be a terrific broadcast. 

Plus, we‘ll have a few of the same features you have appreciated on 1600, including segments like Follow the Money and, of course, Hypocrisy Watch.  Also, the new show will be just as interactive as 1600 has been. 

So send us your ideas via Twitter, of course.  Go to

Twitter.com/Shuster1600 or Twitter.com/TamronHall. 

Again, thank you all for all of your support and thank you for watching MSNBC, the place for politics.  As always, at the top of the hour, my friend Chris Matthews will take over with “HARDBALL.”  Thanks again everybody.  We‘ll see you soon.

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

END   

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