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'The Rachel Maddow Show' for Monday, August 8, 2011

Read the transcript to the Monday show

Guests: Richard Engel, Ed Schultz, Rep. Barney Frank

RACHEL MADDOW, HOST: Good evening, Lawrence. Thanks very much for
that. And thanks to you at home for staying with us for the next hour.

I actually want to start out tonight with a bit of shout out, a big
shout-out to the Newmont Mining Corporation of Denver Colorado --
exceptional work today, Newmont Mining Corporation, a standout performance.
Literally, their performance today as an American company stands out.

CNBC does this thing every day called a heat map. We talked about
this last week, they take the 500 biggest, most actively traded companies
on the stock market, the S&P 500, and they create a map of them showing
basically how the overall day went for those 500 companies.

If the company gets labeled as green, that means they had a good day,
their stock price went up. If they get labeled as red, that means they had
a bad day. It means their stock price went down. This is -- you can see
the heat map here on sort of the left side of your screen, that`s what the
heat map on CNBC looks like, and sort of a typical stock market day.

We haven`t had a typical stock market day in awhile so we actually had
a go awhile back in time to find this example. But, again, this is a
normal day on the heat map. Here`s what the heat map looked like on what
was not a normal day. Here`s what the heat map looked like today.

Oh, boy. Remember, red means I had a bad day. Wait, what -- right
over, far corner, what`s that up there? We should call that like Quadrant
72 or something, out of the 500 dots, there was one green dot today in the
entire S&P 500 on the heat map, one company had one good day, and that was
Newmont Mining Corporation of Denver, Colorado. They were the one company
that was doing OK today, one minute before the closing bell. So, good job,
Newmont Mining Corporation.

I should note, however, that by the time the market did actually
close, Newmont Mining Corporation of Denver, Colorado, was also down by 28
cents.

So, one minute after they were the only green dot on the heat map of
500 dots, their dot went red, too.

So what`s the better visualization tool for how things went today?
The entire S&P 500 heat map turning red like this? Not even an isolated
pinpoint of green anywhere around to make us feel a little better. Is this
the best visual metaphor for today or is this the best visual metaphor for
today?

The percentage drop in the S&P 500 today was, look at the bottom
number there on the right, ah, 6.66 percent. Seriously -- 6.66 percent --
666. Just in case the numerical gods were not being clear enough with us,
it had to be 666.

You know, even if you don`t care about all the details about how and
why this was such a bad today, even if really all you can stomach absorbing
the devil horns and red screen, I am trying to imply that this went badly.
Even if you`re not interested in how it was bad, there`s one important
detail that`s worth absorbing.

If you absorb no other detail other than this about what happened
today, here`s the detail to understand -- while everybody was selling off
all of these stocks today, what were they buying? They were selling every
stock they could get anywhere near, what did they buy?

They bought U.S. treasury bonds. The U.S. Treasury bond is you
loaning the United States some money in exchange for a promise from the
United States the country will pay you back with interest. That`s
essentially the only thing that got bought today, that and gold.

Our friends at Newmont Mining Corporation happened to be one of the
world`s largest gold miners.

Other than gold, though, it`s basically just U.S. treasury bonds that
did well -- everybody in the market fleeing to the security of the full
faith and credit of the United States of America. The tectonic thing that
happened in American finance and also in American politics over the last
three days is that a ratings agency, Standard & Poor`s, said don`t buy U.S.
treasury bonds. Standard & Poor`s said if you loan money to the United
States, we are less sure than we used to be the country will pay you back.

The whole point of the downgrade was to say the U.S. treasury
essentially can no longer be trusted. The market responded by giving the
U.S. treasury all of their money.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: It`s kind of hard to sell treasuries when you got
a market meltdown here. The fight to quality is still the U.S. treasuries,
I don`t care what they`re rated. It`s the best thing out there.

(END VIDEO CLIP)

MADDOW: The flight to quality. I don`t care what they`re rated.
It`s the best thing out there.

That was also what President Obama was talking about today in his mid-
afternoon statement on the markets at the White House.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: On Friday, we learned
that the United States received a downgrade by one of the credit rating
agencies. The markets, on the other hand, continue to believe our credit
status is AAA. In fact, Warren Buffet, who knows a thing or two about good
investments, said if there were a quadruple A rating, I`d give the United
States that.

I and most of the world`s investors agree.

(END VIDEO CLIP)

MADDOW: The whole assertion of the U.S. credit rating downgrade was
that if you lend America money, America maybe no longer good for it -- that
people should think twice about loaning the U.S. money. People shouldn`t
be treasury bills anymore because America might not pay it back.

Nobody, nobody believes that is true.

(BEGIN VIDEO CLIP)

ALAN GREENSPAN, FORMER FEDERAL RESERVE CHAIRMAN: This is not an issue
of credit rating. There is zero probability of default.

(END VIDEO CLIP)

MADDOW: Zero chance that we are not going to pay back people who
loaned America money by buying treasury bills. Zero chance of that.

Nobody disagrees with Alan Greenspan on that. The market knows that.
They showed it today.

And, frankly, the S&P rating agency knows that too. The agency that
downgraded the U.S. credit rating on Friday night sent over to the Obama
administration their draft press release explaining the downgrade they were
about to do.

Here`s the draft. We have the draft. This is the draft press
release. This is not the final version. This is the early version that
was sent to the White House.

It was obtained by Politico.com. We have a link to it on our Web site
if you want to check it out.

The spoiler alert here if you read this is that the math here is wrong
by $2 trillion. What they were initially going to use as their
justification for downgrading the U.S. credit score was math that was
really, really wrong -- math that said, for example, that the U.S. didn`t
deserve to be alongside a country like France in having a AAA credit rating
because our debt problem was so much worse than France`s. Once their math
problem was pointed out to them, once it was pointed to them that we`re not
actually in a worse situation than France, they just dropped that
justification altogether and decided to downgrade us anyway.

This doesn`t really have anything to do with the math. This doesn`t
have really anything to do with numbers. They are not even making an
assertion our credit is any substantially worse than we used to be, that
we`re any less likely to pay back our borrowers than we used to be.

They are not making a numerical argument. They are not making a
financial argument. They are doing political punditry.

They are indicating and indicting the danger of political
brinksmanship in Washington, the bizarre flirtation with default this year,
the cult of intractability that exists on one side of the aisle in
Washington now.

(BEGIN VIDEO CLIPS)

JOHN CHAMBERS, STANDARD & POOR`S: The political gridlock in
Washington leads us to conclude that policymakers don`t have the ability to
proactively, you know, put the public finances of the U.S. on a sustainable
footing.

UNIDENTIFEID FEMALE: Why downgrade the debt when it`s actually about
the political process?

UNIDENTIFIED MALE: The political process becomes important, because
that speaks to how this fiscal and economic and monetary choices are being
made that influences the credit worthiness.

CHAMBERS: If you corrected the political settings that would
certainly improve the credit standing of the United States.

(END VIDEO CLIPS)

MADDOW: It is kind of weird for a ratings agency to make its
executives available for these kinds of interviews, to explain their
rational this much. But the more they explain, the clearer it becomes that
this isn`t really about any particular calculation about the amount of
debt. They don`t even seem to care that their math was wildly, wildly
wrong on that.

What they are doing here is essentially political analysis, it`s about
politics. No, we`re not going to default because of anything actually
wrong with our economic ability to repay our debts. The only reason we
even flirted with default earlier this month, and did we get close to it,
the only reason we got close to it was not because of anything economic
about he country, but because it has become fashionable in Republican
politics to threaten that the United States should default.

Once the debt ceiling deal was reached, the top Republican in the
Senate, Mitch McConnell, described defaulting on our debt as a, quote,
"hostage that`s worth ransoming."

McConnell described taking that hostage as a template for how things
would go moving forward. Quote, "What we have done is set a new template.
In the future, any president, this one or another one, when they request us
to raise the debt ceiling, it will not be clean anymore. Whoever the new
president is, is probably going to be asking us to raise the debt ceiling
again. Then we will go through the process again and see what we continue
to achieve in connection with these debt ceiling requests."

That is not some Tea Party fringe member pressuring the leader of the
Senate Republicans. That is the leader of the Senate Republicans saying
you like getting within hours of defaulting? Well, get used to it. We`re
going to keep doing that whenever we can.

Of all of the Republican presidential candidates this year, all of
them but one, all of them but Jon Huntsman, said they`d vote against
raising the debt ceiling -- meaning that as presidential candidates, they
are advising Republican members of Congress to vote against raise the debt
ceiling. They are advising Congress to let the United States of America
default.

Members of Congress, who in some cases seemed they`d be delighted to
do that. Republican Congressman Jason Chaffetz of Utah quoted in "The
Washington Post" this weekend, saying, "We weren`t kidding around, either.
We would have taken it down."

And by it, he means you. He means the U.S. economy. We would have
defaulted. We wanted it to go nuclear.

If we are talking about the risk of default, if we are talking about
playing with fire, this was not a both sides kind of thing. The Beltway
loves to say, oh, both sides deserve the blame, be evenhanded here.

This is the platonic form of not both sides fault. I`m sorry if this
sounds partisan to point out, but this was not both sides committing the
same error. This was one side. This was Republicans alone causing this
problem by saying they would not raise the debt ceiling, and it`s liberals
and Democrats who have been saying all along that that take by the
Republicans was dangerous.

That`s why it`s frankly weird to be a liberal pundit reading the S&P
press release about Republicans behaving dangerously in Washington, the
reason S&P downgraded the U.S. credit score was essentially the list of
liberal and Democratic talking points against the Republican Congress
taking the debt ceiling hostage.

Listen, this sounds like it is straight off an MSNBC teleprompter.
Quote, "The political brinksmanship highlights what we see as America`s
governance and policymaking becoming less stable, less effective. The
statutory debt ceiling and the threat of default have become political
bargaining chips in the debate over fiscal policy."

That was what S&P said. That`s their press release, what they said
was the reason for this downgrade. The chairman of S&P`s sovereign ratings
committee told "The Wall Street Journal," the downgrade, quote, "was pretty
much motivated by all of the debate about raising of the debt ceiling. It
involved a level of leadership greater than what we had expected."

This was not both sides. I`m sorry to tell the Beltway. I know it`s
upsetting. This was not both sides.

Liberals and Democrats have been saying what Republicans were doing
was dangerous for months now. Knowing Republicans would not listen to any
liberal or Democrat saying that, liberal Democrats even drafted the ghost
of Ronald Reagan to try to make this argument for them, please, listen to
Reagan even if you won`t listen to us. Don`t do this to the country.

But still, the response from congressional Republicans was essentially
-- no, we want to burn it down, and they very nearly did. And now, the
people that sell fire insurance are making us pay more for our fire
insurance policy because it turns out there is an arsonist in our family.

The market dropped today not because the U.S. isn`t going to payback
people who buy treasury bills. If that was the case, people would not have
bought so many darn treasury bills today. That is not why the market
tanked.

The market tanked today, that CNBC heat map looked the way it did
today, we had the sixth worst day ever in terms of point drops on the
market today because the global economy is in bad shape. Europe
particularly, and the U.S. economy is in bad shape, and it doesn`t look
like the U.S. is going to get better fast enough to help ourselves, let
alone to offer hope to the rest of the world.

We really, really, really need some American jobs. We really need
policy to create American jobs.

The fear you are seeing in the American markets is fear about whether
or not we are capable of fixing that problem that we have as a country.

What got sold off today was mostly stock in private companies and
people ran for cover away from private companies and to the security of the
government. The government now needs to prove itself worthy of that faith.
The government now needs to prove itself capable of fixing our real
economic problems.

And, right now, I know it sounds partisan, but believe it, one side in
our politics really is trying to set the whole thing on fire. And the
other side is left to figure out not only how to stop them from doing that,
how to defeat and marginalize that radical fraction in the Republican Party
that is trying to do that, but also how to find enough non-arsonists on
that side of the aisle to actually participate in building something that
will work for the country -- right now, and fast.

This sort of counts as an emergency.

(COMMERCIAL BREAK)

MADDOW: Congressman Barney Frank of Massachusetts joins us next as
does Ed Schultz, who is in Madison, Wisconsin. Please stay tuned.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIPS)

BRIAN WILLIAMS, NBC NEWS ANCHOR: A very bad day on the financial
markets as you hear the closing bell on Wall Street.

UNIDENTIFIED FEMALE: Every single major indices in the world has
closed to the negative.

UNIDENTIFIED MALE: The S&P 500 shellacked, people, 6 percent in one
day.

UNIDENTIFIED MALE: Hey, Washington, welcome to your AA hole.

UNIDENTFIED FEMALE: What a day it has been. The market closing up
the loss of the afternoon.

UNIDENTIFEID FEMALE: The last time we saw such a drop in the Dow was
November 20th, 2008, a time none of us would like to return to.

UNIDENTIFIED MALE: Ye, we`re pretty much there at this point.

OBAMA: We knew from the outset that a prolong debate over the debt
ceiling, a debate where the threat of default was used as a bargaining chip
could do enormous damage do the economy and the world. That threat, coming
after a swing of economic disruptions in Europe, Japan, and the Middle
East, has now roiled the markets and dampened consumer confidence and
slowed the pace of recovery.

(END VIDEO CLIPS)

MADDOW: Joining us now is Democratic Congressman Barney Frank of
Massachusetts, the ranking Democrat on the House Financial Services
Committee. Congressman Frank, thanks very much for your time tonight. I
appreciate it.

REP. BARNEY FRANK (D), MASSACHUSETTS: Welcome, thank you.

MADDOW: When we spoke on Friday right after we learned about the
downgrade, you said taking Standard & Poor`s seriously is not something
rational people ought to do, the market tanked today -- but did not follow
S&P`s advice. Everybody bought U.S. treasury bonds.

What explains that?

FRANK: Well, the market is, to a certain extent, a hall of mirrors.
Reality gets displaced by people`s perception of reality, and I`m not
surprised. I said that people shouldn`t pay attention to Standard &
Poor`s. And, you know, the rating agencies presumably bring to the table
specialized knowledge. Where they were supposed to be doing that with
mortgage-backed securities, they screwed it up badly. They admit -- they
just told people this was wonderful stuff when it was crap and didn`t check
it.

But with U.S. budget, they have no special expertise, everybody knows
everything. So, I am disappointed but not surprised. But the key, Rachel,
I think is we have to figure out what do we do from here? You`re right,
we`ve got to get some jobs, and we have to deal with the debt. And it`s
one way to do it.

We are today spending $140 billion a year approximately on Afghanistan
and Iraq to no good purpose. Iraq was always a mistake in my judgment,
Afghanistan started out with a reasonable possibility. It has now
deteriorated. We continue to defend Western Europe against non-existent
threats.

I want America to be very strong and able to defend itself, but I
don`t want us to take on the job of policing every political dispute
everywhere in the world. We can reduce our military spending by $250
billion a year, $140 billion from the Iraq and Afghanistan wars and over
$100 billion in Western Europe and Japan and other wealthy nations and
bring that money home.

We could use half of it to bring down the deficit and half of it to
produce jobs. You know, there are today 600,000 fewer local employees,
public works employees, people who shovel the snow, collect garbage,
firefighters, teachers, police officers, because we`ve sent that money
overseas in ways that is usual.

I want to do things overseas that will help fight poverty and fight
AIDS, but I think, now, we have to say to our friends on the other side who
say, oh, we must cut spending, don`t tell me to tell a 78-year-old woman
living on $19,000 a year that she gets no cost of living, but you`re going
to continue to pour money into Karzai`s coffers.

So I think at this point we ought to say, OK, I agree complete with
your analysis of how we got here, but now, we can say to some of those
people who helped us get here, OK, let`s bring a couple of hundred billion
dollars home that was spent overseas in unconstructive ways and that` what
we need to get jobs. That`s instead of putting the money into Kandahar,
and Kabul, and Baghdad, where it`s not being used well. Let`s bring it
back, to put it into our cities, put it into highway construction, put it
into people back to work here.

MADDOW: There`s been a lot of coverage recently speaking this year
about an emerging split among Republicans on that, the issue of defense
spending, and whether or not the Pentagon might be a place where they could
think they could some cuts.

There`s actually been less coverage of whether or not Democrats are
unified around that idea.

How much support do you feel you have from the White House and from
other congressional Democrats?

FRANK: Well, from the White House, I`m worried about that.

On the congressional Democrats, I offered an amendment to cut by a
substantial amount the increase to the Pentagon. I would have liked to do
all of it. But I want to test it out.

Democrats voted with me on that amendment 154 to 54. The Republicans
voted heavily against it, but we did get about 60 or 70.

Ron Paul has been very good on this, and some other Republicans.

But my problem is the president, and I strongly support him and I
will, but I`m appalled to read that he is thinking about exceeding to an
Iraqi request that we stay in Iraq longer than George Bush wanted to. And
Leon Panetta, who is a great liberal and concerned about the budget when he
was in Congress, has now bought into that notion that more and more is
important to the Pentagon, even if he goes beyond our legitimate defense
needs. And he said the other day, and I was very disappointed and wrote to
the president, say it isn`t so, Joe, or Barack.

He said let`s cut entitlements and let`s not cut the military.

Now, there`s also revenue. Let`s be very clear what we`re talking
about, taxes. Let`s not call it revenue. It`s raising taxes.

I want to go back to the Clinton tax cut -- tax rates for people in
the top 2 percent. Here`s what we are proposing: if you make more than
$250,000 a year in taxable income, after all your legitimate deductions, if
you`re making more than $250,000 in taxable income, for every $1,000
additional you make, I want to tax you $30 -- $30 on every $1,000 above
$250,000. If we do that, we pull out of Iraq and Afghanistan, we can start
on a better path of reducing the deficit, then we have to do restraints
elsewhere, we don`t have to cut old ladies living on $19,000. We don`t
have to make people who stood on their feet hard all their lives work a few
more years.

You know, the irony is, we are subsidizing the military budgets of
Western Europe -- none of them pay anything like the percentage of their
gross domestic product to the military that we do so that they can give
their people better health care and better retirement and better benefits
altogether.

So -- but the answer is, yes, some of the Tea Party people, you know,
maybe it`s a stopped clock theory. You know, the stopped clock is right
twice a day. They -- many of them do correctly perceive this against the
establishment Republicans, John McCain, Dick Cheney position.

So, I`ve -- we`ve been making progress, but this is our moment. If we
cannot at this point when we`re told we`re in a crisis, when the stock
market is tanking, when we are unfairly being downgraded by S&P the fact is
that it`s out there, when there`s this panic about the need to make
substantial deficit reductions, to continue to spend over $100 billion a
year in the corruption of Afghanistan and Iraq, and deny that to debt
reduction and job creation here is a definition of stupidity.

MADDOW: Congressman Barney Frank of Massachusetts, everybody thinks
that you are so far on the left of the Democratic Caucus -- you would say
stuff that would never appeal to Republicans, and every time you`re on the
show, you talk about things that would appeal to Republicans. I appreciate
you.

FRANK: I`m working with several Republicans and I will continue to do
it. I`ll hang out with anybody if I can get something done right.

MADDOW: Congressman Barney Frank, thank you, sir. Appreciate it.

We will be right back.

(COMMERCIAL BREAK)

MADDOW: Quick programming note: tomorrow is a very important election
day in the great state of Wisconsin. The middle of August is a weird time
for elections, but this is not regularly scheduled politics.

Tomorrow`s elections are recall elections against six Republican state
senators who sided with Wisconsin Governor Scott Walker on his stripping of
union rights in that state. Democratic state senators taking a stand
against that, electrified the Democrat base, leading to protests like these
all through the spring. That energy has been converted into the recall
effort for tomorrow.

If Democrats end up controlling three more seats after these recalls
than they did before the recalls, they will take back the Senate from the
Republican Party`s control.

It is not at all a sure bet that Democrats will be able to do that.
It`s fairly impossible to make predictions here. There`s no precedent for
a recall like this in Wisconsin. It will, of course, all come down to
organization and enthusiasm and get out the vote efforts. It will come
down to turnout.

And MSNBC`s Ed Schultz will be broadcasting live tonight from Madison
-- look at this -- where a crowd is already gathering for him and he`ll
also be there live tomorrow night as well, live at 10:00 Eastern. Ed
Schultz, on the ground for the hugely important Wisconsin state Senate
recall elections will be reporting for us on those elections live in just a
moment.

Stay with us.

(COMMERCIAL BREAK)

MADDOW: On Saturday morning, word first crossed the wires about a
single incident in Afghanistan with an almost unimaginable American toll.
The helicopter carrying 30 Americans, seven Afghan commandos, and an
interpreter crashed west of Kabul, all 38 people on board were killed. Of
the 30 Americans killed, 22 were Navy SEALs, all but two of who were
members of SEAL Team Six, famous now as the elite SEAL unit responsible for
killing Osama bin Laden in May.

This crash is the single deadliest incident for Americans in
Afghanistan since the war began nearly 10 years ago. We do not yet know
the names of all of those men killed, and this is, of course, complicated
by the secrecy surrounding the membership of some elite Special Forces
teams.

But we are starting to learn more about the 30 Americans killed thanks
in large coverage to their hometown newspapers. We have links to reports
out of Green Forest, Arkansas; and Rockford, Ohio; Shreveport, Louisiana;
Jacksonville, North Carolina; Nashville Tennessee; Cape Cod, Massachusetts.
We`ve linked to some of these at our blog, MaddowBlog.com.

In addition to learning more about the casualties, we`re also learning
more about the circumstances of the incident itself. Again, this is the
single deadliest incident for Americans in the entire decade of this war.

The Taliban, of course, took credit within hours of the attack, but
that doesn`t always mean much. According to U.S. officials, the weapon
used to bring down this Chinook helicopter was an RPG, rocket propelled
grenade, although more specific details are as yet still unknown. This is
a twin rotor helicopter carrying these 30 Americans and eight Afghans that
was on its way reportedly to provide support to Army Rangers, on a mission
apparently targeting a Taliban leader. The Chinook helicopter was hit
before reaching those Rangers, and those Army Rangers were the first to
secure the crash site after the chopper came down.

Joining us now live from Afghanistan is Richard Engel, NBC chief
foreign correspondent, who is up at an ungodly hour to be with us tonight.

Richard, thanks so much for joining us. I really appreciate it.

RICHARD ENGEL, NBC NEWS CHIEF FOREIGN CORRESPONDENT: It`s a pleasure.

And it is, I think, a very important story -- not just for the loss of
life, which is in itself very tragic, but it says a lot about the war
itself and how it`s going, that 10 years, nearly 10 years on, you can have
the single deadliest incident that would involve so many of these elite
troops. I think it says a lot about where this country is going and where
the U.S. mission is going as well.

MADDOW: Well, Richard, what do we know about the mission that
resulted in the crash, the specific mission, and why so many elite troops
were involved in this. What does it say to you?

ENGEL: Effectively, you had a mission underway by the Army Rangers,
and this is not the people who go to Ranger school who wear the tab on the
uniform. This is the 75th Ranger Regiment, which itself is an elite group
that operates covertly and does a lot of the deadly missions in this
country and other countries around the world.

The Ranger Regiment was operating. They don`t take journalists
generally, on this mission, hunting a Taliban leader or several leaders of
the Taliban in the Tangi Valley.

The Tangi Valley is about of 60 miles southwest of here. It`s very
remote. It has steep sides, loose shale. You can`t really drive into it,
lots of footpaths.

They were in this valley. They came across several Taliban fighters,
leaders, people carrying RPGs. They engaged them according to the
military`s official account, and then at some stage of this firefight, they
called for backup. The reinforcements who arrived, you have Special Forces
calling in even more Special Forces because the reinforcements that arrived
were mostly these Navy SEALs.

And as they were landing to try and provide more firepower and more
support, that`s when this Chinook helicopter or transport helicopter, a
very vulnerable, big, slow transport helicopter, was hit from the ground by
a single RPG shot.

The Taliban says it brought the helicopter down and the U.S. military
isn`t disputing that.

MADDOW: In terms of the way the Taliban brought it down, is it --
what about the means by which it was brought down, does this seem to you it
was a lucky shot with a low-tech weapon that doesn`t often have the chance
of doing this, or does this say something about advanced tactics and
weaponry? Is it just a lucky shot?

ENGEL: Mostly a lucky shot. No real change in weaponry. This is an
old weapon. This is not something that`s been developed for this conflict.

It`s not just like they got stinger missiles. It was a shot. The
effective range for an RPG is really about 150 yards. So, it`s not an
accurate weapon, it`s not a guided rocket.

It`s just you point it and you shoot it at something and at a very low
altitude when Chinooks are coming in, and they are turning in particular,
they create a very broad target, and this one just happened to hit the
Chinook and bring it down, killing everyone on board.

MADDOW: Richard, a toll like this is the sort of thing that brings
the nation`s attention back to the Afghanistan war. Whether this was a
strategically significant mission or not, it`s got everybody talking about
the war again.

I know you`ve been in and out of Afghanistan many times since the war
began, particularly in the last couple of years, where do you think the
U.S. is strategically right now in relation to our overall reason for being
there?

ENGEL: I think we`re in a very weak position. And I think that`s
going back to why this story is so important beyond the terrible and really
significant loss of life, because these aren`t -- these aren`t just
soldiers, and it`s always an awkward position to say one person`s life is
more valuable than another and you can never make that judgment. It`s a
moral call.

But, strategically and tactically, these soldiers have an incredible -
- these Navy SEALs who died have an incredible amount of training and
incredible amount of experience that is lost and that is something that
doesn`t get regenerated quickly.

But on a larger scale, what does it mean for Afghanistan and what does
it mean for the U.S. involvement here, the U.S. is in the midst of a
transition, the U.S. is drawing back some solders right now.

We`re supposedly ending this surge starting this summer and then
starting this summer and fall and then going on to next year. And the
problem is the Afghan government isn`t filling in the gaps, isn`t stepping
up and taking control of areas. So, you`re seeing the U.S. trying to draw
back but the Afghan government not stepping up and it`s creating a
situation where Afghanistan is getting even more dangerous. There`s more
chaos, and it`s going to be a problem as the U.S. further intensifies it`s
draw downs this year, next year, and after that.

MADDOW: Richard Engel, NBC chief foreign correspondent, live from
Kabul, Afghanistan, on zero sleep. Richard, thank you so much for joining
us tonight. I really appreciate it.

ENGEL: My pleasure.

MADDOW: We will be right back.

(COMMERCIAL BREAK)

(VIDEO CLIP PLAYS)

MADDOW: That was the night Wisconsin Governor Scott Walker`s
stripping of union rights in the state of Wisconsin got suddenly shoved
through the state assembly. That happened after 1:00 a.m. of February 25th
this year.

Tomorrow, Tuesday, August 9th, marks the punctuation mark at the end
of that sentence, that started that night six months ago. Recall elections
inspired by the stand off over union rights begin when polls open at 7:00
a.m. local time in Wisconsin tomorrow. Nobody in the national media
covered the Wisconsin story earlier, more thoroughly, more urgently, or any
better than MSNBC`s own Ed Schultz.

Live tonight on recall election eve, ready to cover tomorrow`s contest
from start to finish is Mr. Schultz himself, who is live in Madison.

Ed, it`s great to see you. Thanks for making this time tonight, my
friend.

ED SCHULTZ, HOST, "THE ED SHOW": Rachel, it`s an honor to be on with
you tonight. I think we really are in the eye of the storm for the fight
for the middle class in this country, tomorrow is going to be a benchmark
day, no question about it.

MADDOW: Ed, I hear the enthusiasm of the folks gathered behind you.
This is sort of an unprecedented situation in terms of this many recalls,
this time of year coming out of this kind of an environment in Wisconsin.
The polls seem close, everything seems unpredictable.

From what you are hearing on the ground, what are you expecting to
happen in tomorrow`s elections?

SCHULTZ: Well, I think there`s going to be a tremendous turnout
tomorrow. It`s something that Wisconsin`s never been through before, this
is uncharted territory. There are polls that are all over the place. But
there is a real air of confidence among the progressive movement tonight.

And there`s a real air of confidence amongst those supporting Governor
Walker. He had the Senate Majority Leader Scott Fitzgerald told "The New
York times" they`d maintain the majority here in the Senate in Wisconsin,
no doubt about it.

So, you got these two titans, this ideological struggle that`s going
to be played out tomorrow for the entire country to see. It`s the best of
America and in the eyes of some, it`s he worst of America. The
obstructionism that`s taken place has brought us to this point and I think
it`s something for the entire country to see.

And I think this is something for the entire country to see. I think
this is the eye of the storm for the fight for the middle class in America.
What happens here if Scott Walker`s Republicans win and if they maintain
the majority, the question is, how does the progressive movement move
forward in Ohio to recall Senate bill 5? What does this do for the
confidence for those under middle class attack in the state of Michigan?

I mean, I think tomorrow is a huge day for the progressive movement in
this country.

MADDOW: How do you think, Ed, that the national political situation
right now is affecting what might happen tomorrow? We`ve got, obviously,
the white knuckle hostage situation over the debt ceiling, tanking of the
markets, president`s response to it -- are those national winds blowing in
Wisconsin affecting their own state`s politics on a night like tonight?

SCHULTZ: I think -- you know, Rachel, I think what happened in the
market today is a great motivator to progressives across the country,
because a lot of middle classers, a lot of low income people got hurt
today. You know, rich people didn`t get hurt today. They move their money
all the time.

I had a well-placed Wall Streeter tell me before I went on vacation
that Wall Street just can`t stand this president and they don`t want to see
him succeed no matter what he does for them.

The fact of the matter is the agenda for the Republicans has been to
slow the economy, to make the election part of the economy. Wall Street is
part of that.

And I just think that President Obama is facing a landscape of
obstructionism that no other president has ever had to face. He`s got a
deck of cards in front of him that I don`t think any president has to deal
back to the American people. I mean, this is tough, tough politics being
played out.

And the one thing that I keep hearing here in Wisconsin is they can`t
take your heart, they can`t take your soul, and they can`t take your vote,
and there`s going to be a big turnout tomorrow. Some people on the
Republican side say as much as 70 percent in these six districts. If
that`s the case, that would certainly parallel what took place in 2010.

And I also think, Rachel, that we are seeing Citizens United play out
on paper in a big way. In the midterms in 2010 on the state level, in the
state races in Wisconsin, less than $4 million was spent. We`re now
pushing $40 million on six selected races in the recall. I mean, this is
money we`ve never seen before in the heartland, so it is going to be a day
for America to watch, no question about it.

MADDOW: Ed, turning the telescope around, one of the things you and I
have talked about so many times over the months and years, frankly, is
whether or not what`s going on in Wisconsin resonates nationally, whether
or not national and D.C. Democrats know that there is a Democratic base.
They look at Wisconsin and recognize there is political game to be gained
by respecting and standing up for your base.

Do you think D.C. Democrats get it the way Wisconsin Democrats do?

SCHULTZ: I do not. I do not. I think there`s a real disconnect, and
I think that you are going to see people come to the polls tomorrow
concerned about the kitchen table issues. They are tired of the
obstructionism that is taking place and the rancoring that`s taking place
in Washington.

This is a chance for them to show their voice that they don`t want the
corporate tax breaks that Walker has put out. They don`t want more taxes
put on the middle class and more hardship put on people with fixed incomes.

That`s why this is so big because this is really a microcosm of what
the national conversation has been. And if the Democrats don`t show up big
tomorrow, it could be really tough for Democrats don`t show up big, it
could be really tough for 2012.

MADDOW: Ed Schultz, MSNBC`s own -- Ed, I could not be happier that
you are exactly where you are now. Thank you for being there and thanks
for being with us tonight.

SCHULTZ: Thank you, Rachel. Great to be with you.

MADDOW: Ed will be back at 10:00 Eastern live from Madison with the
pumped up crowd behind him tonight.

The biggest story in the news is the economic crisis. But beyond
that, and the Wisconsin elections tomorrow, there`s a lot else going on,
including some incredible footage we are getting from the rioting in
London, the worst rioting in London in a generation.

Plus, we`ve got some fairly big news in U.S. presidential politics
that broke sort of order the radar. That`s coming up next.

(COMMERCIAL BREAK)

MADDOW: When a huge important story like the economic crisis takes up
all the oxygen in the room, deservedly so, it that has unfortunate side
effect of squelching most coverage of most other news, even if that other
news is quite important as well. Say for example the riots currently
raging in London for the third day running. It started on Saturday night
in the neighborhood of Tottenham in north London.

A protest against a police shooting of a local man turned violent.
Rioters torching police cars, double decker buses, and local buildings.
Residents telling "The New York Times" that there were underlying reasons
for that unrest.

Quoting from "The Times," "Frustrations in the improvised areas, as in
many others in Britain, has mounted as the government`s austerity budget
has forced deep cuts in social services. At the same time, a widely held
disdain for law enforcement here for a large Afro-Caribbean population has
felt singled out by the police for abuse only intensified."

By Sunday, the second day, the violence spread to other neighborhoods,
it spreads further north where looters attacked local stores and spread to
the south, to Brixton, where I used to work actually, with 200 people
targeted the high street there. By this evening, police were battling
Londoners in Hackney in east London. Rioters torched buildings and buses
just south of the towns (ph) in Peckham. And firefighters battle the huge
blaze at a furniture store in south London.

The violence also spreading, there are also reports, excuse me now, of
rioting now in Camden, in north London, in Notting Hill and west London,
and in Clapham in south London. The violence spreading to smaller cities
in Britain as police today arrested looters in the cities of Birmingham and
Liverpool as well.

The prime minister of Britain, the mayor of London and the home
secretary, the minister responsible for domestic security, have all been on
vacation for the start of the rioting. They are all heading back from or
are back from their holidays now trying to get the situation under control.

We partner with the news agency, ITV. And ITV has put together some
incredible reporting and video footage of the rioting in London. We put up
some of ITV`s best reports in the spot that`s easy for you to find at
MaddowBlog.com if you want to see more of that tonight.

Also in 2012 politics, the biggest news of the day is that the Ames
straw poll in Iowa this weekend will not be the biggest 2012 news of the
weekend. You may recall how Mitt Romney`s official announcement that he
was running was stepped on by maybe candidates Sarah Palin and Rudy
Giuliani, when both of them made sure they were also in New Hampshire and
also making political news on the day that Mr. Romney was trying to make a
splash with his own announcement.

It`s kind of like wearing white to someone else`s wedding. Oh, I`m
sorry, am I stealing your moment.

Well, this weekend in Iowa, the non-bridal proverbial white dress will
be worn by Texas Governor Rick Perry, when all the Republican candidates
trying to make a splash with a good showing in the Ames, Iowa, straw poll
will be overshadowed by Rick Perry making his first presidential campaign
trail appearances in South Carolina and in New Hampshire.

The Rick Perry, soon to be campaign leaking to anyone who will listen
today that all though Governor Perry won`t formally say that he`s running
for president on Saturday, these appearances do mean that he is running and
they do represent the official-unofficial start of his campaign.

So, anybody who sees Iowa and the Iowa straw poll and any PR bounds
they might get from doing well in the straw poll as crucial to the
campaign, hint, hint, Michele Bachmann, Rick Perry has a present for you
this weekend. We will have more on Governor Perry`s candidacy and why I
personally think it`s quite important in the Republican presidential field
this year. And we`ll have more on that candidacy over the course of the
week.

And, finally, we now have an answer to a campaign finance ministry --
ministry, mystery, sorry, about $1 million donation connected with
Republican Mitt Romney. You may remember us covering this last week.

NBC News` Michael Isikoff reported that the $1 million contribution to
the Romney PAC came from a company calls W Spann LLC which was created in
March. It donated the money in April and then it was dissolved in July
just before the PAC had to report the donation to the feds.

Who did the money come from? It`s impossible to find out from public
recordkeeping, which is the whole point of a super PAC. They can take
unlimited money from companies and companies can form and then dissolve
without leaving a much if any trace of who`s money they just laundered.

Michael Isikoff `s reporting on this donated prompted the elusive $1
million donor to come forward, quote, "To address questions raised the
media concerning the contribution, I will request that Restore Our Future
PAC amend its public reports to disclose me as the donor."

It turns out the donor is a man named Edward Conard, who was a
longtime Mitt Romney supporter. He`s also given the Romney presidential
campaign the maximum donation by law which is 2,500 bucks.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: I think the whole
controversy with regards to his contribution disappears when he came
forward and said he was the contributor.

(END VIDEO CLIP)

MADDOW: Wouldn`t it be awesome if all the controversy just
disappeared. The donor in this case is a retired managing director at Bain
Capital. He left Bain in 2007. But interestingly, when we called the
family foundation office to follow up on the statement about the donation,
the person who picked up the phone when he called answered by saying,
"Hello, Bain Capital." Yes.

Bain Capital is, of course, the private equity firm where Mitt Romney
made the millions of his dollars that he did not inherit. And while we
know that one former Bain executive is behind this $1 million partially
laundered donation to Mitt Romney`s PAC, the John Roberts Supreme Court
definition of campaign finance laws in the past couple years means that if
Bain the corporation or any other Bain executive wants to give $1 million
or $10 million or $100 million to try to elect Mitt Romney to president,
there is nothing to stop them anymore and we may never know if they do
that.

Tonight, again, on MSNBC, I`m very pleased to say that Ed Schultz show
will be originating live from Madison, Wisconsin. That will do it for us
tonight. We go to now to Ed live in front of a brilliant crowd in Madison.
Please stay tuned for that.

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

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