updated 1/23/2013 10:47:39 AM ET 2013-01-23T15:47:39

THE ED SHOW with ED SCHULTZ
January 22, 2013

Guests: Katrina Vanden Heuvel, Jeff Merkley, Rep. Jan Schakowsky, Bob Shrum, Joan Walsh, Martin Smith


ED SCHULTZ, HOST: Good evening, Americans. And welcome to THE ED
SHOW, from New York.

Well, the conservatives are whining about President Obama`s speech.
It`s just too liberal.

I say, welcome to the mainstream.

This is THE ED SHOW -- let`s get to work.

(BEGIN VIDEOTAPE)

NARRATOR: It`s morning again in America. And --

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: The era of liberalism
is back.

SCHULTZ (voice-over): The country is awake to the new center left
America, and conservative elites can`t stand it.

BILL O`REILLY, FOX NEWS: The Republican agenda in his mind props up
white privilege.

SCHULTZ: Tonight, Katrina Vanden Heuvel on President Obama and the
official end of the Reagan era.

None of it means anything if the Obama agenda can`t get through the
Senate. Senator Jeff Merkley of Oregon is here with the latest breaking
news on filibuster reform.

Plus, one of the best golfers in the world is losing it over his tax
rate.

UNIDENTIFIED MALE: Of all the nerve!

SCHULTZ: We`ll fact check Phil Mickelson`s ridiculous claim.

UNIDENTIFIED MALE: I owe you nothing!

SCHULTZ: And banks got bailed out and we got sold out. Four years
after Wall Street greed brought the country to its knees, why is no one in
jail?

UNIDENTIFIED MALE: This is a stain on the American justice system.

SCHULTZ: The PBS series "Frontline" has a new documentary airing
tonight. Correspondent Martin Smith joins me for a preview.

(END VIDEOTAPE)

SCHULTZ: Good to have you with us tonight, folks. Thanks for
watching.

I want to start the program tonight showing you what the hottest thing
in politics was 20 years ago today. This is Rush Limbaugh`s first book,
"The Way Things Ought to Be".

For more than two decades, this basically has served as a blueprint
for conservative thought in this country. Here is a sample of a few things
that were in the book.

"What about feeling sorry for those who pay the taxes? Those who are
people that no one feels sorry for. They are asked to give and give until
they have no more to give. And when they say enough, they are called
selfish."

Of course, it`s also filled with deliberately offensive material as
well, like this quote. "I love the women`s movement, especially when I`m
walking behind it."

Limbaugh was so influential, the Republican Congress named him an
honorary member after the 1994 election.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The people that listen to 10 hours of talk radio a
week or more voted Republican by a three-two-one margin. Those are the
people that elected the new Congress. That`s why this is the Limbaugh
Congress.

(APPLAUSE)

(END VIDEO CLIP)

SCHULTZ: As of today, I think we can finally put this book where it
belongs in history. Right there.

The American people have put the brakes on the conservative train
that`s run over a lot of people in this country. President Obama has laid
down a different track for America. The president`s inauguration yesterday
served as proof of a real movement in this country. We are a society now
of tolerance, fairness, and acceptance.

The country is not afraid of progressive values, or to say the word,
"liberal", because most of the country believes in progressive liberal
values.

A majority of Americans believe gay marriage should be legal.

Most people don`t want any cuts whatsoever to Social Security. Even
more people want Medicare left alone.

Only 33 percent want to protect defense spending.

On immigration, the majority believes -- well, the path for
citizenship for undocumented immigrants.

On climate change, we weren`t even talking about that 20 years ago.
Nearly half of this country believed the problem is man-made. Only 24
percent say it is not.

Most Americans recognize the shift in our national mindset. President
Obama`s speech showed an evolving America, I think. Those who do not want
to come along, I guess they`re going to be left behind.

(BEGIN VIDEO CLIP)

SEAN HANNITY, FOX NEWS: First, it was the most partisan and divisive
inaugural address in living memory. Now, there was the veneer of unity and
common purpose. But it`s always unity and common purpose as a means to an
end. And in the end, what Obama defines is advancing his own left wing
agenda.

(END VIDEO CLIP)

SCHULTZ: Actually, the president was advancing the agenda of the
majority of people in this country who voted in the 2012 election.

Another guy who doesn`t get all of this is a guy named Karl Rove. His
super PAC released a web ad today trying to scare people about a liberal
boogie man.

(BEGIN VIDEO CLIP, CROSSROAD GPS WEB AD)

UNIDENTIFIED MALE: Some are calling the president`s address the most
liberal he has delivered.

UNIDENTIFIED MALE: I think the most liberal speech Barack Obama has
ever given.

UNIDENTIFIED FEMALE: Much more radical than the speech he gave four
years ago.

UNIDENTIFIED MALE: He doesn`t have to stand for reelection again.

UNIDENTIFIED MALE: This is clearly a president who is not running for
reelection.

UNIDENTIFIED MALE: Unapologetically liberal.

(END VIDEO CLIP)

SCHULTZ: Congressman Paul Ryan is a guy who believes the country is
made up of makers and takers. I mean, that`s what he said. It`s no
surprise he didn`t like the president`s speech.

(BEGIN AUDIO CLIP)

REP. PAUL RYAN (R), WISCONSIN: The president is a proud and
confident, you know, liberal progressive. He invoked the Constitution and
the Declaration at times, which are something that everybody likes to hear,
especially conservatives. But he invoked them as a means to sort of
legitimize the agenda that he has going forward, which was, you know,
fairly partisan, very ideological for sure, and -- you know, it didn`t
surprise me that he did that, because he is basically saying I`m a liberal,
and I`m going to govern as a liberal, and I won. And so there.

(END AUDIO CLIP)

SCHULTZ: The mayor of cable TV believes it`s proof that America will
be torn apart.

(BEGIN VIDEO CLIP)

O`REILLY: Rather than focusing on America`s vexing problems like
exploding debt and a weak economy, Mr. Obama put forth that the nation`s
top priority must be imposing social justice. So it is quite clear that
the president is willing to go down in history as a crusader for social
justice, no matter what happens to the economic fabric of the country.

(END VIDEO CLIP)

SCHULTZ: You know, I think all these conservatives are forgetting
about another president who transformed the country, and he is I think one
of their favorites, Ronald Reagan. Remember that guy? Inherited a
population deeply unhappy with the direction of the country and the
economy. He established mainstream conservative government by his second
inauguration, a majority of the country believed in his message.

(BEGIN VIDEO CLIP)

RONALD REAGAN, FORMER U.S. PRESIDENT: We ask things of government
that government was not equipped to give. We yielded authority to the
national government that property belonged to states or to local
governments or to the people themselves. We allowed taxes and inflation to
rob us of our earnings and savings, and watched the great industrial
machine that had made us the most productive people on Earth slow down and
the number of unemployed increase.

(END VIDEO CLIP)

SCHULTZ: Times change. A nation and its people evolve. The
philosophy President Obama promoted when he ran for president in 2008 is
now mainstream political thinking in this country.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: That`s the promise of
America. The idea that we are responsible for ourselves, but that we also
rise or fall as one nation. The fundamental belief that I am my brother`s
keeper, I am my sister`s keeper. That`s the promise we need to keep.
That`s the change we need right now.

(END VIDEO CLIP)

SCHULTZ: If President Obama has anything to say about it, we will
remain our brother`s keeper for the next four years. It is not only the
way things ought to be, it`s the way things are.

Let me go back into the trash can here and tell a story about Rush
Limbaugh. Oh, let`s get it correctly. Not upside down, of course.

This was hot 20 years ago. And since then, they got the microphone.
The telecommunications bill came down, and now you can have 500 people
across the country saying the same things Rush Limbaugh says every day.

How come they didn`t win the presidency? How come they don`t own the
Senate? Why did they have to gerrymander all these districts to have to
hang on to the House? And why in our broadcast tonight are we talking
about the Electoral College being shifted in several states because this
guy has been so successful.

No question about it -- very talented, good businessman. But
ideologically, two-in-one show, Rush.

Get your cell phones out. I want to know what you think.

Tonight`s question: is the United States a center-left country? Text
A for yes, text B for no to 622639. You can go to our blog at
Ed.MSNBC.com. And, of course, we`ll bring you the results later on the
show.

Joining me tonight, Katrina Vanden Heuvel, editor and publisher of
"The Nation" magazine.

Katrina, good to have you with us.

KATRINA VANDEN HEUVEL, THE NATION: Thank you very much, Ed.

SCHULTZ: The president`s speech. How did it hit you?

VANDEN HEUVEL: I thought it was one of the most forthright in defense
of progressive government and in defense of community, in defense of
programs that have made this a more decent country for millions of people.

And I like how he was combative in rebuking conservative ideas. For
example, that social insurance programs like Medicare, Medicaid and Social
Security make us a nation not of risk-takers, but of dependents.

I also love to have to say, because you were talking about Ronald
Reagan, he reclaimed the idea of freedom from a market worshipping right
wing, government despising right wing. And I think in doing so, he did an
important service for the center left emerging majority.

SCHULTZ: Was it a benchmark turning point for America? Or was it an
exclamation point of everything that has transform -- transpired in this
country? I mean, we went through the Clinton years. We had economic
growth. We went through the Bush years. We had exploding deficits,
international intervention that we`re still paying a price for and, of
course, Wall Street running wild.

And now, this president gathers the economy and what he has done over
the last 35 months of private sector job growth.

But, was the president`s speech proof positive that the mainstream in
America is left center?

VANDEN HEUVEL: I think we`ve seen the left center emerge over the
last years, Ed, but too often the media doesn`t pay attention to it. You
showed -- survey after survey shows Americans want to see defense cut
instead of social programs. They want to see higher taxes on the very rich
as opposed to cuts in social programs. That majority, that view has been
there.

And I think President Obama, with the wind at his back of a rising
American majority, of a new coalition in this country has seized that
energy and is moving with it. And understands in the speech he spoke of
we, we the citizens invoking the greatest documents of our founding, saying
you must participate in order to do that.

But here is one thing, Ed -- you know, this country has been
confronted with the politics of cycles. In some ways, the politics of the
20th century into the 21st century has been the unending struggle between
the forces of the right and Reaganism and the forces of Roosevelt, the
Great Society, a progressive majority.

And I think the Democrats need to understand that they need to be
closer to Main Street than to Wall Street. And that when they don`t defend
the interests of the common, average, ordinary American, that they`re
letting slip away the power to shape a new coalition.

SCHULTZ: When you look at gay rights, when you look at immigration
reform, which the Republicans and the conservatives have rejected, when you
look at the economy of income inequality in this country, has conservatism
been rejected?

VANDEN HEUVEL: Conservatism has been rejected. And even more
broadly, Ed, conservatism has degenerated into an extremism that is out of
touch with the changing realities of this country. For example, a radical
individualism which a Paul Ryan stands for is out of touch with the needs
of a great country, which needs investment, which needs community.

And I think we`re seeing a Republican Party in full disarray that
doesn`t let the Democratic Party off the hook. It needs to speak to the
inequality in this country, which President Obama is beginning to move
toward.

But when 93 percent of the national growth goes to 1 percent of the
Americans --

SCHULTZ: Yes.

VANDEN HEUVEL: -- that is not a healthy economy.

And I do think it`s incumbent upon us, and I think it`s important to
note that Rush Limbaugh, who very happily, his hucksterism and demagoguery
has been put into the dustbin of history here, that MSNBC is a rising
force. FOX is in a delusional time warp and it is trending downwards.

But it is incumbent upon the media to like laser-like understand that
joblessness, not deficit and debt, is the major crisis of our time. That
inequality is and the corporate power, which you well know, Ed, remains a
force, even while the great social movements of our time, from Seneca
Falls, the women`s rights movement, to Selma, the civil rights movement, to
Stonewall, the great inclusion of gay rights, the gay rights movement --
those are critical, in addition to gun control and environmental rights.

But we also have a political system that is too controlled by
corporate power, and that is the fight of the 21st century.

SCHULTZ: All right. Katrina Vanden Heuvel, great to have you with us
on the program tonight.

VANDEN HEUVEL: Thank you.

SCHULTZ: Thank you so much.

Remember, to answer tonight`s question there at the bottom of the
screen. Share your thoughts with us on Twitter @EdShow and on Facebook.
We want to know what you think.

Coming up, the aggressive agenda American support, it isn`t going to
amount to anything if we can`t get a meaningful filibuster reform to take
place in the Senate. The latest developments with Senator Jeff Merkley,
who joins me next.

Stay with us.

(COMMERCIAL BREAK)

SCHULTZ: Coming up, President Obama lays out the progressive agenda
for his second term. I`ll ask Congresswoman Jan Schakowsky how Democrats
will carry out the president`s plans.

And more than four years after the financial crisis, we haven`t --
these big banks, I mean, they`ve taken us to the cleaners. Bank CEOs have
not been held accountable. "Frontline`s" Martin Smith looked at how big
banks got away with fraud, and he joins me later on in the show.

Don`t forget to listen to my radio show on Sirius XM channel 127,
Monday through Friday, noon to 3:00 p.m.

Share your thoughts with us on Twitter and on Facebook as well, using
#EdShow.

We`re coming right back. Stay with us.

(COMMERCIAL BREAK)

SCHULTZ: Welcome back to THE ED SHOW.

Everything we just talked about before the break, the progressive
causes supported by the American people and articulated by President Obama
in his speech yesterday could amount to really nothing if we don`t get
meaningful filibuster reform in the Senate. And, of course, reform, we`re
being told tonight, is not dead.

Here is Senate minority leader -- Majority Leader Harry Reid.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER: I`ve had some positive
meetings with Senator McConnell before the recess, during the recess our
staffs worked on this. We had another meeting today. And I hope within
the next 24 to 36 hours, we can get something that we agree on. If not,
we`re going to move forward on what I think needs to be done. The caucus
will support me on that.

REPORTER: If you don`t get agreement, does that mean you`ll move
forward with the 51 vote?

REID: Yes.

(END VIDEO CLIP)

SCHULTZ: Reid is willing to move forward with filibuster reform with
only 51 votes. An option called poisonous by Republicans, which is amazing
when you think about it. Meaningful filibuster reform would bring back the
talking filibuster. If Republicans wanted to block a simple up or down
vote on a bill, they would have to hold the floor, just like the old days.

The 60-vote super majority filibuster has been abused by Republicans
like never before in history.

This chart shows just how much the filibuster has been used from 1917
to 2012. The huge spike came in 2008 when President Obama took office.

Republicans have broken the spirit of statesmanship in this country
with the use of the filibuster.

Progressives should be very concerned, frankly, about the potentially
watered down filibuster reform being negotiated between Harry Reid and
Senate Minority Leader Mitch McConnell. Under one option being reported,
the minority party, the Republicans in this case would have to come up with
41 votes to stop a bill or nominee. Instead of the current system, where
the burden is on the majority party to gather 60 votes to advance an issue.

Let`s turn to Senator Jeff Merkley of Oregon, a co-sponsor of
meaningful filibuster reform.

Senator, good to have you with us tonight.

SEN. JEFF MERKLEY (D), OREGON: Great to be with you, Ed.

SCHULTZ: Give us an update. Where are we at this hour? What can you
tell us?

MERKLEY: Well, as leader Reid talked, he is pursuing both options,
the path of 51 and the path of working out a deal with McConnell.

And I can tell you, it`s so relevant what happened yesterday. The
president stood on the steps of the Capitol right behind me, and he said
the time to act is now. And it kind of brought back the fierce urgency of
now language from a few years ago. And that is completely inconsistent
with a paralyzed Senate.

And so, as we discussed among my colleagues at lunch today, we need
the boldest possible reform. And I think we`re going to get that through
the option of going with 51. Not through the option of working out a deal
with McConnell.

SCHULTZ: So you think that you`re going to get what you want, the
talking filibuster. I mean, there is not going to be anymore silent
filibuster. I mean, Senate Majority Leader Harry Reid has been clearly
reluctant to this point, as I know, to adopt your version of talking
filibuster reform.

MERKLEY: Yes. It`s a gold standard. Folks vote for more debate.
They actually have to make their case before their colleagues, before the
citizens. Take responsibility. Are they heroes or are they bums?

And, often, the feedback we anticipate from citizens will help us get
cloture for debate and be able to move forward.

It is not clear that that will be included under either option. But
in the balance of the pieces, and many are pieces I`ve advocated for,
including getting rid of the filibuster, the motion to proceed, getting rid
of it, going to conference committee, it`s a much stronger construction
under the package that Senator Reid is putting together for the 51 vote
option.

SCHULTZ: Well, this is why as you well know, Senator, but I think the
American people, we need to gather this. Because the table, or should we
say that the level of conversation that`s coming from the minority party
right now about possible obstruction is alive and well.

Here is Senate Minority Leader Mitch McConnell earlier today.

(BEGIN VIDEO CLIP)

MCCONNELL: One thing is pretty clear from the president`s speech
yesterday. The era of liberalism is back, an unabashedly far left of
center inauguration speech. If the president pursues that kind of agenda,
obviously, it`s not designed to bring us together.

(END VIDEO CLIP)

SCHULTZ: Senator, the Republicans are in denial. All the big issues
out there, they poll in the minority. They`re not with the majority of
Americans on issues.

So, won`t Mitch McConnell abuse the filibuster again if this isn`t
changed? I mean, that sound bite, shouldn`t that be a wake-up call, all
the Democrats in caucus?

MERKLEY: Oh, I fully anticipate that he`ll use every tool at his
hands. Every tool available, if you will. And it`s why he so fiercely
opposes the talking filibuster, because then he couldn`t kill bills in
secret.

The Disclose Act on the floor widely supported, get rid of secrecy in
campaign donations. They filibustered it, but not with anyone making the
case on the floor or before the American people. It was the complete
silent objection, no accountability, no transparency. And the result is we
still have these huge secret pools of funds that are corrupting our
political system.

And it`s bill after bill. It`s jobs bills. It`s getting rid of --

SCHULTZ: Yes.

MERKLEY: -- loopholes for oil companies. It`s a whole series of
things.

SCHULTZ: So if these rules are changed, as poisonous as the
Republicans claim they are, will President Obama be able to have a
successful second term? Will he be able to get to climate change? Will he
be able to get to immigration reform without the Republicans getting in the
way?

MERKLEY: Well, I think under -- there is no magic set of rule
changes. But if we go with the 51-vote option, with the most robust form,
it certainly puts us in a much better position because there will be
accountability before the public.

And as you said, the public is with us. They want to end the war in
Afghanistan. They want to create jobs. They absolutely would love to see
us get rid of secret campaign donations, and so on and so forth.

SCHULTZ: Senator Jeff Merkley, great to have you with us tonight.
Appreciate your time.

Coming up, President Obama`s inaugural address laid out the case for
change on a number of important issues. Congresswoman Jan Schakowsky is
here to tell us what has to be done in President Obama`s second term.
What`s the priority list?

Then, rigging the next presidential election? Find out what the
Republicans did during the inauguration yesterday in the state of Virginia.
I`ll show you why they`re getting criticized by members of their own party.

Stay tuned. We`re right back.

(COMMERCIAL BREAK)

SCHULTZ: Welcome back to THE ED SHOW.

Following a historic Inauguration Day, the president has the political
capital to set his agenda and get things done in his second term. The
president`s inaugural address set the stage for action on a number of
critical issues, from climate change to immigration reform. He stressed
the importance of protecting the middle class, and said now is the time to
act.

(BEGIN VIDEO CLIP)

OBAMA: For now, decisions are upon us, and we cannot afford delay.
We cannot mistake absolutism for principle, or substitute spectacle for
politics or treat name-calling as reasoned debate.

(APPLAUSE)

We must act. We must act, knowing that our work will be imperfect.

(END VIDEO CLIP)

SCHULTZ: Right now, President Obama has the chance to set a clear
course and ask you for help. He has an opportunity to create a vision of
goals for the American people to embrace and demand.

There is more to do on health care. There is more to do on a number
of issues. There are still the Republican governors out there refusing to
expand Medicaid. There are still ways to improve Obamacare, like adding a
public option.

Then there is immigration. The president has been tougher on
undocumented immigrants than any of his modern-day predecessors.

But he`s issued a clear call for national resolve to realize the full
potential of the dreamers. And never deny a path to citizenship for those
who want to pledge of allegiance to our flag and be a part of our society
and our country. The president can bring new taxpayers into the system,
and who will enrich our technology sector, no question about it, strengthen
our manufacturing base and these folks will become Americans and serve in
our military.

Now on tax reform, this president has got to move forward with his
basic message and still firmly in place. And that is the middle class must
be protected.

The big three must be protected. Strengthen and celebrate it, because
it`s a bedrock of our country`s success. On education, the president of
the United States has an opportunity to strengthen our classrooms and
recommit to public education in this country, our teachers, so we can
compete in a global market.

Now, for the Republicans, they have vilified all of these
institutions. They think that tax cuts for the wealthy and deregulation is
exactly how we should run the country. And that`s it. President Obama
actually accomplished a heck of a lot in his first term. But there is so
much more he can do on a number of important issues facing our country in
the second term.

We are a center-left country. We are progressive. Progressives are
in the majority. We have to think like that as a movement. We have to
think like that as a people.

And the chatter across the street, we learned one thing about those
folks during the 2012 election. They lie. They do a pretty good job of
it. So when we start going down the road of immigration reform and climate
change and fair taxation and public education, we`ll get plenty of lies
from the right, because they`re damn good at it. But we have the majority
on our side. And President Obama knows it.

And he has set a course for us to grab the jugular and get after it.

For more on this, let`s turn to Congresswoman Jan Schakowsky of
Illinois. Congresswoman, good to have you with us tonight.

REP. JAN SCHAKOWSKY (D), ILLINOIS: Thanks, Ed.

SCHULTZ: Where do you think the focus needs to be in the wake of what
the president laid out yesterday, and of course the State of the Union
coming up in the early in this 113th? Where does the focus have to be?

SCHAKOWSKY: You know, the president called not just -- you were
talking about the Dreamers, today`s Dreamers. But he also talked about our
founding dreamers and the mainstream principles that they set forward,
hoping that they would take hold, of life, liberty, and the pursuit of
happiness, all men and women are created equal. These are centrist ideas.

I was on Fox earlier today. And they did this whole thing about this
left wing agenda. I said excuse me, I think the president was exactly in
the center of the country. The vast majority of Americans want to protect
Social Security and Medicare, the middle class, and help to raise up the
poor, to create good jobs, jobs of the 21st century, and ask the wealthiest
Americans to pay a bit more.

You know, they use the word liberal still again as some sort of an
epithet, a nasty word. But the American people chose President Obama again
because he is speaking to the needs of the majority of people.

SCHULTZ: What kind of damage would the Republicans do to themselves
if they went down the road of obstruction again? I mean, if the 113th
starts to shape up like the 112th?

SCHAKOWSKY: Well, you know, they`re already less popular than a root
canal, slightly more popular than Gonorrhea, according to a recent poll.

SCHULTZ: So what does that tell the Democrats right there? What you
just said, they are not with the mainstream right now.

SCHAKOWSKY: No, they are not.

SCHULTZ: How aggressive do the Dems have to be? >

SCHAKOWSKY: So I think we have to be perfectly clear. For example,
tomorrow my hope is when they want to do another gimmicky kind of increase
in the debt ceiling, just three months, and if a budget doesn`t pass, then
members of Congress can`t get any pay, their pay is held up, I think that
we ought to ask them, then, to put up all the votes, I mean enough votes to
pass the bill, to see if their members, who have pledged not to raise the
debt ceiling, who said they wouldn`t do it unless there were deep cuts for
every dollar, that the -- for every dollar that the debt ceiling was
raised, a dollar in cuts.

SCHULTZ: Sure.

SCHAKOWSKY: Let`s see what they do tomorrow.

SCHULTZ: Congresswoman Jan Schakowsky, thanks for joining us tonight.
Appreciate it so much. There is a lot more coming up in the next half hour
of THE ED SHOW. Stay with us.

(BEGIN VIDEO CLIP)

REINCE PRIEBUS, RNC CHAIRMAN: This is our generation`s rendezvous
with destiny.

(END VIDEO CLIP)

SCHULTZ: Republicans can`t win elections with their policies. So
Reince in the gang are hard at work rigging the electoral college system.
The latest stunner from Virginia is next.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: He`s had it with taxes. He says he`s going to
take drastic action. He says he`s had enough.

(END VIDEO CLIP)

SCHULTZ: Legendary golfer Phil Mickelson is complaining about his new
tax rates. We`ll tell you why he should stick to golf.

And the PBS series "Frontline" is out with a new documentary about a
lack of accountability on Wall Street.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: In the due diligence world, fraud was the f word.
You didn`t use that word.

(END VIDEO CLIP)

SCHULTZ: Correspondent Martin Smith is here tonight with a preview.

(COMMERCIAL BREAK)

SCHULTZ: Welcome back to THE ED SHOW. Republicans can`t win a
presidential election with their ideas, so they`re just trying to rig the
vote instead. Republicans in Virginia, Pennsylvania, and Michigan want to
change the way they award electoral votes. But they aren`t trying to
improve the system. They only want to change the electoral process for
some people.

GOP Chairman Reince Priebus said last week "I think it`s something a
lot of states which have been consistently blue but are fully controlled
red ought to be looking at." Red states like Kansas and North Dakota and
Idaho don`t need to worry about changing their electoral laws. The
Republicans really want these states.

They went for President Obama in 2012. But they`re controlled by
Republican governors and legislatures. Changing the law in these states
would have won 45 more electoral votes -- electoral college votes for Mitt
Romney. Now, it wouldn`t have been enough for him to beat President Obama
in 2012, but what about the next Democrat?

Republicans, what are they doing? They`re already scheming. In fact,
they use the president`s inauguration to get ahead in 2016. That`s right,
just yesterday, while Virginia State Senator Henry Marsh attended the
inauguration, Virginia Republicans realized they outnumber Democrats by one
vote. They ambushed the Dems with a massive redistricting bill.

Republican Governor Bob McDonnell says he doesn`t like the dirty
tricks, but he won`t promise to veto it.

(BEGIN VIDEO CLIP)

GOV. BOB MCDONNELL (R), VIRGINIA: Obviously, the tactics that were
used yesterday was a surprise. And I don`t think that that`s the way
business should be done. But I haven`t looked at the bill.

(END VIDEO CLIP)

SCHULTZ: Oh, I bet you haven`t. Michigan`s Republican Governor Rick
Snyder might support a similar election scheme in his state. Snyder thinks
reallocating electoral votes could be done in a thoughtful way. Nothing
about this is thoughtful. It`s strategic. This isn`t about fixing a
broken system. It`s about Republicans giving their party an edge in 2016.

I`m joined tonight for the conversation by Joan Walsh, editor at large
for "Salon," and also Bob Shrum, professor of public policy at NYU and a
"Daily Beast" contributor. Great to have both of you with us tonight.

Joan, what do you make of this? Is this somewhat of a policy
surrender by the Republicans? They have to do this to win?

JOAN WALSH, "SALON": Yeah, they know that they are on a course of
demographic extinction, Ed. You know, 90 percent of their voters are
white. Their voters are older. And rather than change their policies and
think about how to really reach the new America that is emerging, they
decided they`re going to shut out -- they`re going to change the voter, not
change the policies.

Now, we saw -- after 2008 and President Obama`s election, we saw 38
states -- Republicans in 38 states introduce some kind of legislation that
would restrict voting rights. And now they`ve gotten even more sinister,
and they`re trying to change the way districts are drawn. And in this
case, you know, a wonderful civil rights hero in Virginia, a state senator,
Henry Marsh, went to the president`s inauguration. And while he was gone
on the Martin Luther King holiday, they voted without him. And that`s the
only way they got it passed.

I just want to say we turned back a transvaginal ultrasound bill in
Virginia. There is Bob McDonnell -- he is very, very conservative, but he
is sensitive to national pressure. So I think people just have to raise
holy hell about what they did. It`s just too ugly a bill to sign.

SCHULTZ: Bob, can Virginia and Michigan really make a difference in
the next presidential?

BOB SHRUM, NYU PROFESSOR: Oh, absolutely. And look, what is going on
here is a felonious assault on free elections. It`s an attempt to
gerrymander the presidency. If you think about it, you could argue that
Republicans have not won the presidency on the up and up since 1988. They
stole 2000 when they stole Florida with the complicity of the Supreme
Court.

SCHULTZ: Right.

SHRUM: In 2004, they engaged in massive voter suppression. People in
Ohio had to weight eight and ten hours to vote, and tens of thousands of
them couldn`t wait eight or ten hours. They tried it again in 2012 and
they lost. They can`t win the presidency.

So what they want to do is institutionalize the system where the loser
wins. This is a kind of Soviet style election.

SCHULTZ: Sure. Joan, what is the solution here? If they don`t have
the gubernatorial chair and they don`t have the state legislatures, they
just have to get them back. That is the only thing that is going to stop
this tidal wave.

WALSH: I think a few things can stop it. Obviously turning things
around in 2014 will help. I think the Justice Department does have some
oversight. You know, Section V of the Voting Rights Act lets them review
states where they`ve had a history of racial discrimination in voting
patterns. So there is some recourse there, at least in terms of review.
It`s not clear exactly what they could do to change what has been done.

And public opinion, just talking about this. Reince Priebus -- last
seen, you and I had a conversation about him when he accused his own state
of being a hotbed of voter fraud, when Wisconsin actually an incredibly
clean state when it comes to that. I think we just have to educate our
voters as to what is happening and raise holy hell.

SCHULTZ: So Bob, it`s go win state houses now. That`s what it is?

SHRUM: We got to win in 2014. We have to win state houses. We have
to win legislatures so that, A, this can`t happen. And B, if it does
happen, we can turn it back. But you know, in Pennsylvania, Republicans
discussed doing this before 2012. And there was a kind of wave of public
revulsion about it. And I think there are also maybe some Republicans with
a conscience who wouldn`t do this, who actually believe in democracy, at
least I hope there are.

And number two, in terms of their own self-interest, some of these
folks, if they do this, are going to see to it that an Obama-like
organization moves in, competes in their districts, competes against them,
whether they`re in the state legislature, whether they`re in Congress. And
that`s not very good for them.

But the most fundamental point here, and Joan is absolutely right,
this is a disaster for democracy.

SCHULTZ: Yeah.

SHRUM: We`ve had enough blows at the credibility of our democracy in
the last 12 or 15 years.

SCHULTZ: No doubt.

SHRUM: We don`t need something like this.

SCHULTZ: Organizing for action. All of the sudden it`s got a couple
of missions they`ve got to complete I think, in Michigan and also in
Virginia. Joan Walsh, Bob Shrum, great to have you with us.

Coming up, I`ll tell you why multi-millionaire golfer Phil Mickelson
should think about hiring a new accountant. Stay tuned.

(COMMERCIAL BREAK)

SCHULTZ: Welcome back. We want you to join the conversation on
Facebook with THE ED SHOW. Many of you are talking about the news that
singer Beyonce lip-synched her performance of the National Anthem at
yesterday`s Inaugural ceremony.

Not a big deal for FalloutDual, who writes "she did sing it, just not
that day."

Nate Provance says "I`m sure the Republicans are going to blame
Obama."

Marguerite Garcia says she couldn`t care less. "Thank God it was
Obama standing there and not that other guy."

You can go to our Facebook page right now and weigh in. And don`t
forget to like THE ED SHOW when you`re there.

Still to come, "Frontline" correspondent Martin Smith joins me to
discuss the Wall Street untouchables, and why big bank CEOs haven`t been
held accountable. Nobody is in jail for the financial crisis. And I think
a lot of lefties want to know why. We`re coming right back.

(COMMERCIAL BREAK)

SCHULTZ: And we are back. Pro golfer Phil Mickelson has done it
pretty good, wouldn`t you say? A 42-year-old guy has made more than 67
million dollars in career earnings since turning pro in 1992. Last year,
he was ranked by "Forbes" as the seventh highest paying athlete, with 47.8
million dollars in earnings.

But apparently Mickelson has it rough. He thinks he is getting
shortchanged. Speaking to reporters on Sunday, Mickelson said changes in
the tax code have really got him rethinking his next move. He says, "if
you add up all the federal, and you look at the disability and the
unemployment and Social Security and state, my tax rate is 62, 63 percent.
So I have to make some decisions on what to do."

The first thing I suggest, Phil, is that you got to get maybe a new
accountant, or at least give the one you have a pretty good phone call.
Because the most you, lefty, could pay is 60 percent. And that`s if he
does absolutely no tax planning or basic deduction. It`s estimated his
rate should be closer to 50 or 52 percent.

But let`s say Mickelson`s estimate of 63 percent, let`s say it`s
correct. He would still take home 17 of the 47 million that he has earned
last year, which to average Americans is probably pretty good pocket
change. Still sounds like a good deal for a gig playing golf, don`t you
think? So if you`re really paying 63 percent, thank you, Phil Mickelson;
appreciate it. Because your taxes pay for that public education system
responsible for creating a working class successful enough to afford
leisure time to watch your sport.

Your taxes pay for the roads and transportation, infrastructure that
allows people to travel to see you play, and for the products you sponsor
to be shipped around the world on those public highways. Your taxes pay
the first responders who protect your fanny and your family. That private
overseas, you know, that guy in the military that wears the uniform, he
makes about 18,000 dollars a year to keep you and this country safe so you
can go do what you do, Phil.

So Phil, did you really build that?

Tonight in our survey, I asked you, is the United States a center-left
country? Eighty percent of you say yes; 18 percent of you say no.

Coming up, they got bailed out and you got sold out. Wall Street`s
shady banking practices trashed the economy, yet nobody at a high level
executive position is being held accountable. Next, I`ll talk with Martin
Smith of "Frontline" and find out what he learned, talking to mortgage
industry whistle-blowers. Stay tuned.

(COMMERCIAL BREAK)

SCHULTZ: And in the Big Finish tonight, it`s been over four years
since we faced near economic collapse. The ripple effect is still being
felt at kitchen tables across this country. And yet not one high level
Wall Street executive has gone to jail. And no one is being held
accountable for what led to America`s financial meltdown.

The PBS series "Frontline" has a new documentary out investigating
Wall Street`s business practices. Correspondent Martin Smith spoke with
several mortgage industry whistle-blowers, folks that were working as due
diligence underwriters well before the housing bubble burst. They got paid
to assess risk. And yet when they came across loan applications that
should have set off alarms, their supervisors didn`t want to hear about it.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Even if we suspected, we had to say this appears
to be incorrect. You would never say this looks fraudulent.

UNIDENTIFIED MALE: Fraud -- in the due diligence world, fraud was the
"F" word or the "F" bomb. You didn`t use that word.

UNIDENTIFIED MALE: Even if a loan was clearly stated income that made
no sense, there was no support.

UNIDENTIFIED MALE: But you didn`t use the word fraud.

UNIDENTIFIED MALE: But it was fraud? You saw loans --

UNIDENTIFIED MALE: By your terms and my terms, yes, it was fraud.

(END VIDEO CLIP)

SCHULTZ: The Obama Justice Department has investigated these shady
banking practices and have come up with nothing.

(BEGIN VIDEO CLIP)

LANNY BREUER, ASSISTANT ATTORNEY GENERAL: What I do believe is that
when we speak to the whistle-blowers, we have to make a determination
whether what they say is really a criminal case.

KEVIN PERKINS, FBI ASSOCIATE DEPUTY DIRECTOR: We`re not able to show
criminal intent sufficiently enough to obtain what we believe to obtain
conviction.

(END VIDEO CLIP)

SCHULTZ: I`m joined tonight by Martin Smith, producer and
correspondent for "Frontline`s" "The Untouchables," which premiers tonight
10:00 on most PBS stations and can be viewed any time at PBS.org/Frontline.

Great work. It had to be an eye opener to have these whistle blowers
step forward. Due diligence underwriters told you that it wasn`t uncommon
to see school teachers claiming salaries of 12,000 dollars a month on their
mortgage applications. Yet some of these whistle-blowers say they`ve never
been contacted by the Justice Department. Why is that?

MARTIN SMITH, "FRONTLINE": That`s a question for the Justice
Department. And I want to add to your opening remarks, which is that no
high level Wall Street CEO, leader on Wall Street has gone and faced any
jail time. No mid level executive on Wall Street.

SCHULTZ: How did they get away with it?

SMITH: These -- first of all, I`ll say that these are well lawyered
transactions. But when you dig in to what the due diligence underwriters,
who were hired by the banks to look into these loans and judge for the bank
what`s the quality is of the risk they`re taking, over and over again, as
the bubble inflated, the number of defective loans rose from 50 percent, 60
percent and beyond. They reported this up the chain.

They were told to loosen the standards in many cases. That`s what
they report to us. Why this can`t be pursued by the Justice Department, I
can`t answer. Lanny Breuer, chief of the criminal division, says it`s very
difficult to do it, that they`ve done it. But yet we were able to go out
and find people that had not been contacted by the Justice Department.

SCHULTZ: What was the most amazing story you got out of one of the --
in uncovering all of this in your documentary?

SMITH: Well, I think that there is one -- one of them talks about how
they were instructed not to use the word "fraud." One of them lost his job
because he had used the word fraud. He was working for Lehman Brothers,
doing a job for them.

SCHULTZ: Questioning the system?

SMITH: He called up Lehman Brothers and said look, I`m finding what
looks to me to be fraud. He was demoted after that.

SCHULTZ: So moving forward with a second Obama term, any reason to
believe that Wall Street is going to be held accountable?

SMITH: Time is running out. When I talk to the FBI, had the clear
sense the game was over. Now statute of limitations is running. Although
there are some instances where it extends as much as 10 years. So there is
still time to prosecute.

And just recently, we`ve seen the New York attorney general file a
lawsuit against JP Morgan, Bear Stearns for fraud. They didn`t name
individuals. They didn`t target individuals. And it`s a civil case. But
the attorney general, Eric Schneiderman, thinks that perhaps there could be
in the future some criminal charges brought. But we haven`t seen it yet.

SCHULTZ: This could be the tip of the iceberg, this documentary.
It`s going to be an eye-opener to a lot of people. A lot of people are
wondering why no one is in jail.

Martin Smith, we`re going to have you back after this plays a few
times. I think you`re going to get a lot of reaction to it. Thanks so
much.

SMITH: Thank you very much.

SCHULTZ: That`s THE ED SHOW. I`m Ed Schultz. "THE RACHEL MADDOW
SHOW" starts right now. Good evening, Rachel

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

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